Which of the following scenarios is an example of a recognition lag? The economy: a)enters a deep recession on the same day that new quarterly data show positive economic growth. b)enters a deep recession, and parliament takes two months to approve an extensive tax-cut bill.b) c)enters a deep recession, and parliament passes spending bills for public works projects that will take years to plan and build.
Which of the following scenarios is an example of a recognition lag? The economy: a)enters a deep recession on the same day that new quarterly data show positive economic growth. b)enters a deep recession, and parliament takes two months to approve an extensive tax-cut bill.b) c)enters a deep recession, and parliament passes spending bills for public works projects that will take years to plan and build.
Chapter26: Monetary Policy
Section26.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model
Problem 14SQ
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Which of the following scenarios is an example of a recognition lag?
The economy:
a)enters a deep recession on the same day that new quarterly data show positive economic growth.
b)enters a deep recession, and parliament takes two months to approve an extensive tax-cut bill.b)
c)enters a deep recession, and parliament passes spending bills for public works projects that will take years to plan and build.
Which of the following scenarios is an example of an administrative lag?
a)Policy makers obtain relevant economic data months after a recession has already begun.
b)A new law requires that all new spending bills go through at least one month of debate before receiving a parliament vote.
c)In response to a recession, parliament passes a spending bill for motorway upgrades that will take years to plan and complete
Government financing of deficit spending can offset the deficit's expansionary effect if government borrowing increases interest rates and reduces private investment. The offsetting effect is known as the (crowding-out effect, consumption smoothing, cyclical budget deficit)
Suppose the governments of two different economies, economy A and economy B, implement a tax cut of the same size. The tax cut in economy A is permanent, while the tax cut in economy B is temporary. The economies are identical in all other respects.
The tax cut will have a larger impact on current consumption and aggregate demand in economy:
B
A
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