The Existence of Staggered Overlapping Wage Contracts Makes the Assumption

question 103

Multiple Choice

The existence of staggered overlapping wage contracts makes the assumption of backward-looking expectations ________ reasonable since wages and prices tend to adjust ________ to changes in nominal GDP.

• A)less,quickly
• B)less,gradually
• C)more,quickly
• D)more,gradually

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Definitions:

Perfect Knowledge

A hypothetical situation in economics where all consumers and producers have complete and instantaneous knowledge of all market prices, conditions, and trends.

Perfect Mobility

A theoretical condition where factors of production, such as labor and capital, can be freely moved from one use to another without costs or barriers.

Marginal Revenue

The revenue increment achieved by selling an extra unit of a product or service.

Marginal Cost

The expense associated with manufacturing an additional unit of a product or service.