What term refers to the time it takes for the Bank of Canada's purchase of government securities to ultimately change aggregate demand?
A) recognition lag
B) implementation lag
C) effectiveness lag
D) decision-making lag

Question

What term refers to the time it takes for the Bank of Canada's purchase of government securities to ultimately change aggregate demand?  
A) recognition lag 
B) implementation lag 
C) effectiveness lag 
D) decision-making lag

Quizplus · Accepted Answer

The term that refers to the time it takes for the Bank of Canada's purchase of government securities to ultimately change aggregate demand is the effectiveness lag. This lag occurs because it takes time for the increased monetary base resulting from the purchase to filter through the financial system, leading to an increase in lending, spending, and ultimately aggregate demand. The other choices (recognition lag, implementation lag, decision-making lag) refer to different stages in the monetary policy process.

What Term Refers to the Time It Takes for the Bank