Any test of rational expectations is a joint test of the underlying model that expectations are formed rationally.

A flat LM curve implies that

A) an increase in government spending will change output by a relatively small amount. B) a decrease in taxes will change output by a relatively small amount. C) changes in government spending and taxes will have a large multiple effect on output. D) A and B.

Are countries that began modern economic growth more recently doomed to be permanently poorer than the countries that began modern economic growth in earlier periods? Explain.

What will be an ideal response?