The lag problem associated with monetary policy is due mostly to
A)the fact that business firms make investment plans far in advance.
B)the political system of checks and balances that slows down the process of determining monetary policy.
C)the time it takes for changes in government spending to affect the interest rate.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The lag problem associated with monetary policy is mainly due to the fact that business firms make investment plans far in advance. Monetary policy affects the economy with a lag because firms need time to adjust their investment plans, and consumers need time to adjust their expenditures in response to changes in interest rates. The other options mentioned are not the primary reason for the lag problem.

The Lag Problem Associated with Monetary Policy Is Due Mostly