If Firms Have Rational Expectations and If They Set Prices

question 16

Multiple Choice

If firms have rational expectations and if they set prices and wages on this basis, then on average

• A) prices and wages will be set at levels that do not clear the goods and labor markets.
• B) prices will be set at levels that ensure equilibrium in the goods market, but wages will be set at levels that do not clear the labor market.
• C) prices and wages will be set at levels that ensure equilibrium in the goods and labor markets.
• D) wages will be set at levels that ensure equilibrium in the labor market, but prices will be set at levels that do not clear the goods market.

---

Definitions:

Neuron Labeled

A neuron that has been marked or tagged for study, typically to trace connections or identify specific types of neurons.

Vertebrate Embryo

An early stage in the development of animals with backbones, where the fundamental structures that define the vertebrate form are established.

Neural Tube

The hollow, longitudinal structure in the early vertebrate embryo that gives rise to the brain and spinal cord. The neural tube forms from the neural plate, a flattened, thickened region of the ectoderm that rolls up and sinks below the surface.

Neural Plate

The flat layer of embryonic ectodermal cells that develops into the nervous system, including the brain and spinal cord.