In general, what is the longest lag for fiscal and monetary policy?
A) For both fiscal and monetary policy, it is the time it takes to change policy.
B) For both fiscal and monetary policy, it is the time it takes for policy to affect aggregate demand.
C) For monetary policy, it is the time it takes to change policy, while for fiscal policy the longest lag is the time it takes for policy to affect aggregate demand.
D) For fiscal policy, it is the time it takes to change policy, while for monetary policy the longest lag is the time it takes for policy to affect aggregate demand.

Question

Quizplus · Accepted Answer

For fiscal policy, the longest lag is the time it takes to change policy (i.e. passing legislation and implementing it), while for monetary policy, the longest lag is the time it takes for policy to affect aggregate demand (i.e. the time it takes for changes in interest rates to work their way through the economy).

In General, What Is the Longest Lag for Fiscal and Monetary