One timing problem in using ﬁscal policy to counter a recession is the "operational lag" that occurs between the
A) start of the recession and the time it takes to recognize that the recession has started.
B) start of a predicted recession and the actual start of the recession.
C) time ﬁscal action is taken and the time that the action has its effect on the economy.
D) time the need for the ﬁscal action is recognized and the time that the action is taken.

Question

Quizplus · Accepted Answer

The operational lag refers to the time it takes for fiscal policy actions to have their intended effect on the economy. This lag can be quite long, sometimes taking several quarters or even years to fully manifest. Therefore, even if policymakers recognize the need for fiscal action promptly, passing legislation and implementing the measures will take time, and then there is further time required for the economy to respond.

One Timing Problem in Using ﬁScal Policy to Counter a Recession