According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate

Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the above figure is the PPF for hotels and consumption goods in the two areas

Hotels are a capital good that,once built, will help produce still more consumption goods. If Puerto Rico produces more hotels than Hawaii, A) Hawaii's PPF will shift outward further than Puerto Rico's PPF. B) Hawaii's PPF will shift inward. C) Puerto Rico's PPF will not shift. D) Puerto Rico's PPF will shift outward further than Hawaii's PPF. E) Puerto Rico's and Hawaii's PPF will shift outward by the same amount.

The longer and more unpredictable that the policy lags are, the stronger the case for active stabilization policy

a. True b. False Indicate whether the statement is true or false