The time between a shock to the economy and the policy action responding to that shock is called the:
A) automatic stabilizer.
B) time inconsistency of policy.
C) inside lag.
D) outside lag.

Question

Quizplus · Accepted Answer

The time between a shock to the economy and the policy action responding to that shock is referred to as the inside lag. This includes the time it takes to recognize that a policy response is required and the time to implement the policy.

The Time Between a Shock to the Economy and the Policy