In fiscal policy, the inside lags:

Question

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Inside lags refer to the time it takes for policymakers to recognize a problem in the economy, develop a policy response, and implement that response. These steps can take a significant amount of time, which leads to longer inside lags than outside lags. Outside lags refer to the time it takes for the policy response to have an effect on the economy. For fiscal policy, this can take several quarters. Therefore, the best answer is D, as the inside lags are generally longer than the outside lags.

In Fiscal Policy, the Inside Lags