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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

How might lags reduce the effectiveness of fiscal policy?

To determine

Explain the role of lags in the effectiveness of fiscal policy.

Explanation

The fiscal policy lags are the amount of time taken by the government to respond to the shocks in an economy. The lags reduce the effectiveness of fiscal policies in various ways. Some of them are listed below:

  • Time lag: Generally, the government needs an expansionary fiscal policy to eliminate the recessionary gap in an economy. Although the different types of lags cause to delay implementation of the expansionary policy at the appropriate time...

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