Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2
-Refer to Figure 14.2. If the economy is currently at Point B and policy makers implement a policy which shifts the aggregate demand curve to AD₁, the time the economy needs to make the adjustment is known as the

Question

Refer to the information provided in Figure 14.2 below to answer the questions that follow.

Figure 14.2
-Refer to Figure 14.2. If the economy is currently at Point B and policy makers implement a policy which shifts the aggregate demand curve to AD₁, the time the economy needs to make the adjustment is known as the

Quizplus · Accepted Answer

The time it takes for the economy to adjust to a shift in aggregate demand is known as the response lag. The implementation lag refers to the time it takes for policy makers to put the policy into effect, while the recognition lag refers to the time it takes for policy makers to recognize that there is a need for action. The frictional lag refers to the time it takes for markets to adjust to changes in prices or wages.

Refer to the Information Provided in Figure 14