1. forecasts will be accurate and unbiased.
2. there will always be price flexibility and full employment.
3. people use all information available to them in in setting wages and prices.
4. all of the above will be true.
Choose the correct option.
The right answer is option 3. People will use all the information available to them in making their decisions, though each person will make his/her own interpretation of what that information means. Forecasts will be unbiased, but only by chance will they be accurate. Available information will nearly always be incomplete and forecasting errors will occur as a result. Only in the rare case where the public's forecasts of aggregate demand happen to be correct will there be full-employment.
It is worth reviewing again the reason why people's forecasts will be unbiased---that is, just as likely to be wrong in the upward as in the downward direction. Suppose one's forecasts tended to be systematically too high. Eventually, one would recognize this and adjust all future forecasts downward by the amount of the upward bias. Similarly, if one's forecasts tended on average to be low, one would add a sufficient amount to all future forecasts to compensate for the downward bias.