Why do long lags make discretionary policy less effective?
A) because by the time the impact of a discretionary policy is felt, the problem it was meant to cure may have been corrected
B) because lags are longer in contractions than in expansion.
C) because lags are longer in expansions than in contractions
D) because automatic stabilizers are subject to longer lags than are discretionary policies

Question

Why do long lags make discretionary policy less effective?  
A) because by the time the impact of a discretionary policy is felt, the problem it was meant to cure may have been corrected 
B) because lags are longer in contractions than in expansion. 
C) because lags are longer in expansions than in contractions 
D) because automatic stabilizers are subject to longer lags than are discretionary policies

Quizplus · Accepted Answer

Long lags make discretionary policy less effective because by the time the impact of the policy is felt, the economy may have already self-corrected or moved further away from the intended target. This is particularly true in situations where the policy response is slow to materialize or when there are implementation delays.

Why Do Long Lags Make Discretionary Policy Less Effective