If a Firm Expects the Rate of Inflation to Be

Multiple Choice

If a firm expects the rate of inflation to be 2 percent, it will expect its competitors to

A) do anything, since firms operate under limited information.
B) increase prices by 2 percent unless circumstances change.
C) not raise prices unless there is a change in circumstances.
D) increase prices by more than 2 percent unless circumstances change.
E) increase prices by less than 2 percent unless circumstances change.