The time between when a recession begins and when the central bank lowers interest rates to stimulate aggregate demand is an example of an:
A) inside lag of monetary policy.
B) outside lag of monetary policy.
C) inside lag of fiscal policy.
D) outside lag of fiscal policy.

Question

Quizplus · Accepted Answer

The time between when a recession begins and when the central bank lowers interest rates to stimulate aggregate demand is an example of an inside lag of monetary policy. Inside lags of monetary policy refer to the time it takes for policymakers to recognize the need for a policy action and to implement it. In this case, it takes time for the central bank to gather information and analyze the state of the economy before deciding to lower interest rates.

The Time Between When a Recession Begins and When the Central