Which of these illustrates the information lag?
A) Real GDP, an indicator of economic growth, is predicted to increase by 0.1% in July, but the numbers are revised in August to reflect an actual 2% decrease.
B) Current data have been provided to policymakers, but they decide to wait and see what happens in the next quarter.
C) The government responds to the 2% decrease in real GDP, and private investment is crowded out of the investment market.
D) The government decides not to respond to the 2% decrease in real GDP because it is worried about the possibility of inflation.

Question

Quizplus · Accepted Answer

The information lag is illustrated in option A as the initial prediction of a 0.1% increase in real GDP is revised a month later to reflect an actual 2% decrease. This lag indicates that policymakers could have made decisions based on inaccurate or outdated information. Option B reflects a decision to wait before making any choices, rather than an information lag. Option C shows a result of the government's response to the real GDP decrease, and option D shows a policy decision to not respond, rather than an information lag.

Which of These Illustrates the Information Lag