Time lags are delays in the economy's response to stabilization policies. For a particular stabilization policy, which of the following represents the correct order in which these time lags occur?
A) implementation lag → response lag →recognition lag
B) response lag → implementation lag →recognition lag
C) recognition lag → implementation lag →response lag
D) implementation lag → recognition lag →response lag

Question

Quizplus · Accepted Answer

Recognition lag is the time it takes for policy makers to recognize the need for intervention. Implementation lag is the delay between recognizing the need for a policy and the time it takes to implement it. Response lag is the time it takes for the policy to have an effect on the economy.

Time Lags Are Delays in the Economy's Response to Stabilization