If the economy is in a boom, the response lag is generally shorter for monetary policy than for fiscal policy, but if the economy is in a slump, the response lag is generally shorter for fiscal policy than for monetary policy.

Question

Quizplus · Accepted Answer

The response lag for monetary policy versus fiscal policy does not inherently depend on whether the economy is in a boom or a slump. Instead, fiscal policy often has longer implementation lags due to the need for legislative approval, whereas monetary policy can be adjusted more quickly by central banks. The effectiveness and timing of these policies depend more on their specific mechanisms and the current economic conditions rather than the phase of the economic cycle alone.

If the Economy Is in a Boom, the Response Lag