Non-activists believe that that expectations are ________ formed and that wages and prices are ________ with respect to the expected price level.
A) adaptively; completely flexible
B) adaptively; sticky
C) rationally; completely flexible
D) rationally; sticky

Question

Quizplus · Accepted Answer

Non-activists typically believe in rational expectations, meaning that individuals use all available information efficiently to forecast future economic variables. They also believe that wages and prices are completely flexible, adjusting quickly to changes in the expected price level.

Non-Activists Believe That That Expectations Are ________ Formed and That