One Key Assumption Lying Behind the Policy Irrelevance Proposition Is

question 169

Multiple Choice

One key assumption lying behind the policy irrelevance proposition is that

• A)wages are "sticky" downward.
• B)prices are "sticky" upward.
• C)the rational expectations hypothesis is correct.
• D)markets are not purely competitive.

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Definitions:

Price Inflation

The rate of growth in the overall price levels for goods and services, cutting down on purchasing capacity.

Real Price

The cost of a product or service once inflation has been taken into account, showing its true ability to purchase.

Arbitraging

The practice of buying a product or asset in one market and selling it in another to profit from a difference in price between the two markets.

Transportation Costs

Expenses involved in moving goods or services from one location to another.