Inside lags associated with fiscal policy are due to all of the following, except:

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Inside lags associated with fiscal policy include the time required for government officials to recognize that a change in policy is needed, the time required to pass the necessary legislation, the time lag involved in implementing the change, and the time required for the effects of the change to be felt in the economy. The delayed response of firms to a tax cut is actually an example of an outside lag, not an inside lag. Therefore, option C is incorrect. The political infighting involved in approving changes in government spending or taxes, poor and conflicting data available to policymakers, and delays in assessing the real state of the economy are all inside lags that slow down the implementation of fiscal policy.

Inside Lags Associated with Fiscal Policy Are Due to All