The lag between the time that the money supply is increased and the time that investment expenditures increase is an example of a:
A) fiscal inside lag.
B) fiscal outside lag.
C) monetary inside lag.
D) monetary outside lag.

Question

Quizplus · Accepted Answer

The lag between the time that the money supply is increased and the time that investment expenditures increase is an example of a monetary outside lag. Monetary policy can take time to work its way through the economy, and this lag is known as the monetary outside lag. It can take several months for the effects of monetary policy to be felt in terms of increased investment expenditures.

The Lag Between the Time That the Money Supply Is