The time between when government spending increases and when aggregate demand starts to increase 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 government spending increases and when aggregate demand starts to increase is an example of an outside lag of fiscal policy. Outside lags refer to the time it takes for a policy change to have an impact on the economy, and in this case, the impact of increased government spending on the economy takes time to materialize.

The Time Between When Government Spending Increases and When Aggregate