A Central Concept of New Keynesian Macroeconomics Is That in Setting

Multiple Choice

A central concept of New Keynesian macroeconomics is that in setting prices and wages,self-interested firms and workers are acting

A) irrationally,since their self-interest is badly damaged by the ensuing business cycles.
B) irrationally,since this imposes business cycles on everyone not part of their arrangements.
C) rationally,since they do not bear a fully offsetting cost of business cycles.
D) rationally,since the total welfare loss of business cycles must be small enough to justify the price and wage setting.