Suppose the government had made a decision to change fiscal policy, but it then took nine months to implement a tax reduction. This is an example of
A)automatic fiscal stabilizers.
B)a decision lag.
C)fine tuning.
D)gross tuning.
E)an execution lag.

Question

Quizplus · Accepted Answer

The delay in implementing the tax reduction is an example of an execution lag, which occurs when the government decides to change fiscal policy but takes time to implement the policy. Automatic fiscal stabilizers refer to changes in government spending and taxation that occur automatically without explicit action from policy-makers. A decision lag is the time it takes for policy-makers to recognize a problem and decide on a course of action, while fine tuning and gross tuning refer to the degree and direction of changes in fiscal policy.

Suppose the Government Had Made a Decision to Change Fiscal