Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession.(2) Economists reach agreement that the economy is moving into a recession.(3) A tax cut is proposed in Congress.(4) The tax cut is passed by Congress and signed by the president.(5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover.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 is the time taken between the recognition of the need for a policy action and the actual implementation of that policy. This is reflected in events 3 and 4, where a tax cut is proposed and then passed by Congress and signed by the president.

Answer the Question on the Basis of the Following Sequence