The new classical macroeconomic model assumes 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

The new classical macroeconomic model assumes that expectations are formed rationally, meaning individuals use all available information efficiently. It also assumes that wages and prices are completely flexible, adjusting quickly to changes in the economy.

The New Classical Macroeconomic Model Assumes That Expectations Are ________