Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1
-Refer to Figure 14.1. If the condition of the economy at Point H is realized by policy makers when the economy is at Point I, policy is likely to be inappropriate due to
A) crowding out.
B) the implementation lag.
C) the recognition lag.
D) the response lag.

Question

Refer to the information provided in Figure 14.1 below to answer the questions that follow.  Figure 14.1
-Refer to Figure 14.1. If the condition of the economy at Point H is realized by policy makers when the economy is at Point I, policy is likely to be inappropriate due to
A) crowding out. 
B) the implementation lag. 
C) the recognition lag. 
D) the response lag.

Quizplus · Accepted Answer

The lag between the time when a problem in the economy is recognized and when policy is actually implemented is called the recognition lag. If policy makers are only recognizing the problem at Point H, but the economy is already at Point I, then policy implemented in response to the problem will likely be inappropriate and insufficient.

Refer to the Information Provided in Figure 14