Refer to the information provided in Figure 29.2 below to answer the question(s) that follow. Figure 29.2
-Refer to Figure 29.2. If the economy is currently at Point A and policy makers implement a policy to increase aggregate demand, the time the economy needs to make the adjustment is known as the
A) implementation lag.
B) recognition lag.
C) response lag.
D) frictional lag.

Question

Refer to the information provided in Figure 29.2 below to answer the question(s) that follow.  Figure 29.2
-Refer to Figure 29.2. If the economy is currently at Point A and policy makers implement a policy to increase aggregate demand, the time the economy needs to make the adjustment is known as the
A) implementation lag. 
B) recognition lag. 
C) response lag. 
D) frictional lag.

Quizplus · Accepted Answer

The time it takes for the economy to adjust to a policy change is known as the response lag. This is the time it takes for businesses and consumers to react and adjust their spending habits. The implementation lag refers to the time it takes for policy makers to implement a new policy, while the recognition lag is the time it takes for policy makers to recognize that a policy change is necessary. The frictional lag refers to the time it takes for workers to find new jobs if they are displaced by an economic shock.

Refer to the Information Provided in Figure 29