There is no guarantee that after a tax cut households will immediately use their extra disposable income to consume more goods and services; they may maintain old spending patterns and change their spending slowly over time.As a result,the ________ for fiscal policy can last from several months to several years.
A) the response and recognition lags
B) the recognition lag
C) the impact lag
D) all three policy lags

Question

Quizplus · Accepted Answer

The impact lag refers to the time it takes for the effects of fiscal policy, such as a tax cut, to influence the economy. Households may take time to adjust their spending habits, leading to a delayed impact on economic activity.

There Is No Guarantee That After a Tax Cut Households