(1)The composite index of leading indicators turns downward for three consecutive months; (2)Economists reach agreement that the economy is moving into a recession; (3)A tax cut is proposed in Parliament; (4)The tax cut is passed by Parliament; (5)Consumption spending begins to rise,aggregate demand increases,and the economy begins to recover.
-Refer to the above information.The operational lag of fiscal policy is reflected in events:

Question

Quizplus · Accepted Answer

The operational lag of fiscal policy refers to the time it takes for the policy change to be implemented and have an effect on the economy. In this scenario, the tax cut is proposed in Parliament (event 3), but it is not until it is passed by Parliament (event 4) that it can have an effect on the economy. Consumption spending then begins to rise and the economy begins to recover (event 5). Therefore, the operational lag of fiscal policy is reflected in events 4 and 5, making option D the correct choice.

(1)The Composite Index of Leading Indicators Turns Downward for Three