Which of the following statements is correct regarding the lags in fiscal and monetary policy?
A) The inside lag is the time needed for monetary policy to be effective while the outside lag is the time needed for fiscal policy to be effective.
B) The outside lag is the time needed for monetary policy to be effective while the inside lag is the time needed for fiscal policy to be effective.
C) The lag for monetary policy is shorter than the lag for fiscal policy.
D) The lag for fiscal policy is shorter than the lag for monetary policy.

Question

Quizplus · Accepted Answer

The lag for monetary policy is typically shorter than the lag for fiscal policy. This is because monetary policy can be implemented relatively quickly through actions such as changing interest rates, while fiscal policy often requires the approval and implementation of legislation, which can take more time.

Which of the Following Statements Is Correct Regarding the Lags