Which lag stems from the fact that it takes time for people and firms to react to a policy change, to acquire or reduce loans, and to change their level of consumption?
A) the implementation lag
B) the recognition lag
C) the market lag
D) the impact lag

Question

Quizplus · Accepted Answer

The lag described is the impact lag, which is the delay in seeing the effects of a policy change due to the time it takes for people and firms to react and make necessary adjustments. The other lags include the recognition lag, which is the time it takes for policymakers to identify a problem and react to it; the implementation lag, which is the time it takes for a policy to actually be put in place; and the market lag, which is the time it takes for market data to be collected and analyzed.

Which Lag Stems from the Fact That It Takes Time