Which of the following is NOT a basic assumption of the "Lucas" model?
A)slow adjustment of wages and prices
B)rational expectations
C)imperfect information
D)market-clearing

Question

Quizplus · Accepted Answer

The Lucas model assumes rational expectations, imperfect information, and market-clearing. The slow adjustment of wages and prices is not a basic assumption of the Lucas model; instead, it typically assumes that markets clear without such frictions.

Which of the Following Is NOT a Basic Assumption of the "Lucas