How much would Samantha be willing to pay for the insurance?

Which one of the following accurately states the view of activists who favor discretionary stabilization policy?

a. Neither monetary nor fiscal policy will exert an impact on the real level of economic activity. b. Since we have only limited ability to forecast the future direction of the economy, the best policy is to do nothing. c. Our ability to forecast the future direction of economic activity is quite good, and therefore, discretionary macroeconomic policy is now capable of eliminating fluctuations in the business cycle if policy makers would follow the advice of leading economists. d. The index of leading indicators and other forecasting tools provide policy makers with valuable information that permits them to institute stabilizing changes in macroeconomic policy.

Suppose a central bank takes actions that will lead to a higher inflation rate. The public, however, is slow to adjust its expectation of inflation. Then, in the short run, unemployment

a. rises. As inflation expectations adjust, the short-run Phillips curve shifts right. b. rises. As inflation expectations adjust, the short-run Phillips curve shifts left. c. falls. As inflation expectations adjust, the short-run Phillips curve shifts right. d. falls. As inflation expectations adjust, the short-run Phillips curve shifts left.