Suppose the economy is experiencing a significant recessionary gap, but it has taken the government six months to determine that it will change fiscal policy. This is an example of
A)gross tuning.
B)an execution lag.
C)automatic fiscal stabilizers.
D)a decision lag.
E)fine tuning.

Question

Quizplus · Accepted Answer

The fact that it took the government six months to determine a change in fiscal policy implies that there was a delay between identifying the recessionary gap and taking action to address it, which is referred to as a decision lag. The other options do not accurately describe the scenario described in the question.

Suppose the Economy Is Experiencing a Significant Recessionary Gap, but It