Which of the following are TRUE?
I.New Keynesian economists believe that money wage rates are influenced by rational expectations of the price level.
II.New classical economists believe that money wage rates are influenced by rational expectations of the price level.
III.New classical economists believe expected changes in aggregate demand trigger business cycles.
A) I and II
B) I and III
C) II and III
D) I, II and III

Question

Quizplus · Accepted Answer

I. New Keynesian economists believe that money wage rates are influenced by rational expectations of the price level. This is true because New Keynesian economists believe that individuals and firms have rational expectations, meaning that they use all available information to form their expectations about the future. As such, they believe that money wage rates will be influenced by expectations of the price level.II. New classical economists believe that money wage rates are influenced by rational expectations of the price level. This is false because New classical economists believe that money wage rates are determined by the real wage rate, which is not influenced by expectations of the price level.

Which of the Following Are TRUE