Outside lags occur because
A) firms must change investment plans before monetary policy can be effective.
B) it takes time to identify a problem.
C) once a problem is diagnosed, it still takes time to implement policy changes.
D) once changes are finally diagnosed and implemented, policies are immediately effective.

Question

Quizplus · Accepted Answer

Outside lags refer to the delay between the implementation of a policy and the observable effects on the economy. In this context, firms need time to adjust their investment plans in response to monetary policy changes, which is why option A is correct.

Outside Lags Occur Because