A consequence of the impact lag is that the Fed
A)may not know the impact of a change in policy.
B)might not be able to correct a mistaken policy soon enough.
C)may not have current information about the state of the economy.
D)may see the impact of a change in policy on inflation, but not economic growth.

Question

Quizplus · Accepted Answer

The impact lag refers to the time it takes for a change in policy to affect the economy. As a result, the Fed may not be able to correct a mistaken policy soon enough because it may take time for them to see the impact of their policy change. The other options (A, C, and D) are not necessarily consequences of the impact lag. While the Fed may not have current information about the state of the economy (C), this is not directly related to the impact lag. Additionally, the possibility of only seeing the impact of a policy change on inflation but not economic growth (D) is a potential issue, but is not necessarily a consequence of the impact lag.

A Consequence of the Impact Lag Is That the Fed