Chapter 20, Problem 1MCQ

To determine

The correct option which contributes to the lag in implementing fiscal policy.

Answer to Problem 1MCQ

From the available options, the correct option is all of the above contribute.

Explanation of Solution

Implementation lag refers to the delay in making or implementing of a fiscal policy which includes time for Congress and the President to pass spending and tax changes, the present economic data take time to collect and analyze, time is needed to realize an output gap which exists, and time is required to make the changes in spending and tax policy come into effect. Therefore, the correct option is e (all of the above contribute) as things would be considered to the lag in implementing fiscal policy.

Economics Concept Introduction

Introduction: Fiscal policy is a policy through which government spending and tax policies are used to make the economic conditions better.