In response to the 2008 recession, New Zealand's Finance Minister Bill English stated that "... the 7 billion New Zealand dollars would be allocated to new infrastructure spending, providing financial aid to workers hit by layoffs as the economy slows and includes tax cuts planned for April." www.iht.com, 11/26/2008
New Zealand's government expects the policies to shift the ________ but at this point in time the ________ might weaken its ability to affect real GDP.
A) AD curve rightward; recognition lag
B) LAS curve leftward; impact lag
C) SAS curve rightward; law-making lag
D) AD curve rightward; impact lag

Question

Quizplus · Accepted Answer

The policies mentioned (infrastructure spending, financial aid, and tax cuts) are designed to increase aggregate demand (AD), hence shifting the AD curve rightward. The "impact lag" refers to the delay between the implementation of these policies and their effect on the economy, which might weaken the immediate ability to affect real GDP.

In Response to the 2008 Recession, New Zealand's Finance Minister