In response to the 2008 recession, New Zealandʹs Finance Minister Bill English stated that ʺ... the 7 billion New Zealand dollars would be allocated to new infrastructure spending, providing financial aid to workers hit by layoffs as the economy slows and includes tax cuts planned for April.ʺ
New Zealandʹs government expects the policies to shift the __________ but at this point in time the ___________might weaken its ability to affect real GDP.
A) AD curve rightward; impact lag
B) AD curve rightward; recognition lag
C) LAS curve leftward; impact lag.
D) SAS curve rightward; law-making lag

Question

Quizplus · Accepted Answer

The statement suggests that the government expects the policies to shift the AD curve rightward. However, since there may be a lag between the implementation of the policies and their actual impact on the economy, there could be a recognition lag where it may take time for the effects to be felt. Therefore, choice A is the best answer. The LAS curve is unlikely to shift leftward unless there are significant changes in the factors of production or productivity. The SAS curve can shift rightward through technological advancements or changes in input prices, but it is not applicable in this scenario. The law-making lag is not relevant to this question.

In Response to the 2008 Recession, New Zealandʹs Finance Minister