Question

Explain policy lags briefly and compare fiscal and monetary policies with respect to inside and outside lags.

Answer 1

Answer

A policy lag is defined as the lag between the time when the problems in economy arises like iflation or recession and the effect of the applied policy which is intended to act i counter also called countercyclical policy.

.The goals in mind is same for the fisal authorities and moentry authorithies which is actually a stable and gowing economy.But there ways are different .The monetry refers to the nations money supply controlled by central bank.And fiscal refers to budget and determine how the govt. is spending money.When the central bank changes the money supply it is governed by monetry authorities and when the govt. is spending taxes, or doing transfer payment that is governed by fiscal authorities .

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