(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 administrative 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 administrative lag of fiscal policy refers to the time it takes for the government to propose and pass a fiscal policy measure. In this scenario, the tax cut is proposed in Parliament (event 3) and is then passed by Parliament (event 4). Therefore, the administrative lag is reflected in events 3 and 4, making choice C the correct answer. Events 1 and 2 reflect the time it takes for economists to reach a consensus on the state of the economy (recognition lag), while events 4 and 5 reflect the time it takes for the tax cut to have an impact on the economy (impact lag).

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