Under perfect competition, firms are relatively ignorant of the actions of their competitors

The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to change purchasing behavior over time by purchasing less of the goods whose prices have risen by relatively large amounts and by buying more of the goods whose prices have risen less or maybe even fallen. What problem does this cause for measuring the cost of living?

Classical economists thought that

A. flexible wages and prices were the principal causes of recessions. B. the Great Depression confirmed their view of the business cycle. C. government policies and spending were needed to keep the economy at full employment. D. ?price, wage, and interest rate flexibility can quickly cure any tendencies for a recession.