Economists estimate that the total lag for monetary policy is about:
A) 1-2 days.
B) 2 weeks to 1 month.
C) 3-12 months.
D) 2-4 years.

Question

Quizplus · Accepted Answer

The total lag for monetary policy is estimated to be between 3-12 months. This includes the recognition lag, decision lag, and implementation lag. The recognition lag refers to the time it takes for policymakers to identify changes in the economy that require a policy response. The decision lag is the time it takes for policymakers to make a decision on what policy actions to take. Finally, the implementation lag is the time it takes for the policy actions to be implemented and have an effect on the economy. Therefore, it can take several months for the full effects of a monetary policy action to be felt in the economy.

Economists Estimate That the Total Lag for Monetary Policy Is