When there is an interval between when the fiscal policy changes and corresponding changes in aggregate spending, we have a(n)
A) aggregate time lag.
B) action time lag.
C) recognition time lag.
D) effect time lag.

Question

Quizplus · Accepted Answer

Effect time lag refers to the time it takes for changes in fiscal policy to have an impact on aggregate spending. This lag can occur due to the time it takes for policy changes to be implemented or for individuals and businesses to adjust their behavior in response to the new policies.

When There Is an Interval Between When the Fiscal Policy