Question

For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy.

a. The separation of power demonstrated between the legislative and executive branches of government combined with strong partisanship attitude among our elected politicians.

• Recognition lag

• Legislative lag

• Implementation lag

• All of these lags

b. The fact that it takes economists working for the National Bureau of Economic Research months to declare the dates of peaks and troughs.

• Recognition lag

• Legislative lag

• Implementation lag

• All of these lags

c. The time it takes to design and build new infrastructure after these projects have been passed by the legislature.

• Recognition lag

• Legislative lag

• Implementation lag

• All of these lags

Answer 1

(a) The separation of power demonstrated between the legislative and executive branches of government combined with strong partisanship attitude among our elected politicians. : Legislative lag.

(b)  The fact that it takes economists working for the National Bureau of Economic Research months to declare the dates of peaks and troughs. : Recognition lag.

(c) The time it takes to design and build new infrastructure after these projects have been passed by the legislature. : Implementation lag.