The existence of menu costs are often used to explain why
A) fiscal and monetary policies should be relatively effective.
B) the price of services, like those provided by restaurants and barbers, rise at a faster rate than the price of goods, like automobiles and clothing.
C) food prices tend to rise disproportionately rapidly in the consumer price index.
D) price and wage adjustments will be relatively rapid.
E) people prefer to look backward, instead of forward, when anticipating the future.
Question 2
Those economists who attempt to explain why wages and prices do not freely adjust would most likely be
A) real business cycle theorists.
B) new classical economists.
C) new Keynesian economists.
D) new growth theorists.
E) none of the above
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