(1) The composite index of leading indicators turns downward for three consecutive months; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Parliament; (4) The tax cut is passed by Parliament; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover.Refer to the above information.The operational lag of fiscal policy is reflected in events:
A)1 and 2.
B)2 and 3.
C)3 and 4.
D)4 and 5.

Question

Quizplus · Accepted Answer

The operational lag of fiscal policy refers to the time it takes for the government to recognize that the economy is in a recession, propose a tax cut, pass the tax cut through Parliament, and for the tax cut to have an effect on consumption spending and aggregate demand. This process is reflected in events 3 to 5, which is when the tax cut is proposed, passed, and leads to an increase in consumption spending, aggregate demand, and economic recovery. Therefore, the correct answer is D.

(1) the Composite Index of Leading Indicators Turns Downward for Three