What is the effect of lags in the approval and implementation of fiscal policy?
A) Lags weaken fiscal policy as a tool of economic stabilization.
B) Lags increase the effectiveness of fiscal policy as a tool of economic stabilization.
C) Lags help legislators to better assess which policies are most appropriate to adopt.
D) Lags make fiscal policy more responsive to the current economic environment.

Question

What is the effect of lags in the approval and implementation of fiscal policy?  
A) Lags weaken fiscal policy as a tool of economic stabilization. 
B) Lags increase the effectiveness of fiscal policy as a tool of economic stabilization. 
C) Lags help legislators to better assess which policies are most appropriate to adopt. 
D) Lags make fiscal policy more responsive to the current economic environment.

Quizplus · Accepted Answer

Lags in the approval and implementation of fiscal policy can weaken its effectiveness as a tool of economic stabilization. For example, during an economic downturn, there may be a delay in passing a fiscal stimulus package, which can exacerbate the downturn and prolong the recovery period. Additionally, even after a policy is passed, there may be a lag in its implementation, which further delays its impact on the economy.

What Is the Effect of Lags in the Approval and Implementation