The imperfect-information model assumes that producers find it difficult to distinguish between changes in:
A) real wages and nominal wages.
B) the overall level of prices and relative prices.
C) the overall level of prices and the expected level of prices.
D) cost-push inflation and demand-pull inflation.

Question

Quizplus · Accepted Answer

The imperfect-information model posits that producers may struggle to differentiate between changes in the overall level of prices and changes in relative prices. This difficulty arises because they might not have complete information about the prices of all goods and services in the economy, leading to potential misinterpretations of price signals.

The Imperfect-Information Model Assumes That Producers Find It Difficult to Distinguish