According to the concept of rational expectations
a. budget deficits are irrelevant to output in the short-run.
b. higher deficits should increase output in the short-run if they are expected.
c. lower deficits can be used to stabilize output during expansions.
d. none of the above.
Question 2
Moore (1959) finds evidence to suggest that the mild cyclical deviations in employment and output of the Korean War were caused by progressive income taxes and unemployment compensation.
Indicate whether the statement is true or false
