The lags associated with monetary policy make its implementation more difficult during:
A) recessions only.
B) expansions only.
C) both expansions and recessions.
D) neither expansions nor recessions.

Question

Quizplus · Accepted Answer

The lags associated with monetary policy, namely the recognition lag, decision lag, and implementation lag, make its implementation more difficult during both expansions and recessions. The recognition lag refers to the time it takes for policymakers to recognize that the economy is in need of stimulus or restraint. The decision lag refers to the time it takes for policymakers to agree on and announce a new policy. The implementation lag refers to the time it takes for the policy to actually take effect and have an impact on the economy. These lags can make it difficult for policymakers to time the implementation of monetary policy perfectly, leading to potentially unintended consequences. Thus, the answer is C.

The Lags Associated with Monetary Policy Make Its Implementation More