Asked by Christine Dawson on Jul 12, 2024
Verified
Which of the following is true of lags associated with discretionary policy?
A) Such lags extend only from the time a problem occurs in the economy through the time it is recognized by the government.
B) Such lags extend only from the time a problem is recognized by the government through the time an agreed-on policy is approved of.
C) Such lags extend only from the time a policy is approved through the time the policy is implemented.
D) Such lags can be reduced by taxation.
E) Such lags extend only from the time a problem occurs in the economy through the time a corrective policy has an impact on the economy.
Discretionary Policy
Economic policies based on the judgment of policymakers rather than set by predefined rules.
Corrective Policy
Corrective Policy refers to government actions taken to fix imperfections in the market, aiming to improve economic efficiency and promote fairness.
Economy
A system by which goods and services are produced, distributed, and consumed within a society or geographical area.
- Grasp the fundamentals of policy lags, identifying the types such as decision-making lag, implementation lag, effectiveness lag, and recognition lag, as they apply to macroeconomic policy.
Verified Answer
SM
Sophia MarieJul 17, 2024
Final Answer :
E
Explanation :
Lags associated with discretionary policy refer to the time it takes for the government to recognize a problem in the economy, formulate a policy to address the problem, and implement the policy. These lags can only be reduced by implementing a policy that has an impact on the economy from the time the problem occurs to the time the corrective policy is implemented. Therefore, the correct answer is E.
Learning Objectives
- Grasp the fundamentals of policy lags, identifying the types such as decision-making lag, implementation lag, effectiveness lag, and recognition lag, as they apply to macroeconomic policy.