Which one of the following is NOT a criticism of the nominal-wage rigidity assumption?
A)Less than one-third of the labour force in Canada is covered by a labour contract.
B)Some labour contracts contain cost-of-living adjustments.
C)Real wages are procyclical.
D)Both employees and employers make their decisions based on rational expectations.

Question

Quizplus · Accepted Answer

Rational expectations do not directly criticize nominal-wage rigidity; instead, they suggest that both parties use all available information to make informed decisions, which doesn't inherently conflict with the concept of wage rigidity.

Which One of the Following Is NOT a Criticism of the Nominal-Wage