Policy? Statement 1: An inside lag exists between the time a policy change is needed and the time the Fed identifies the problem and decides which policy tool to use. The inside lag for monetary policy is shorter than for fiscal policy because fiscal polic is usually the result of a long political budget process. Statement 2: An outside lag occurs between the time a policy decision is made and the time the policy change has its effe on the economy. Statement 3: The total lag (inside plus outside lags) is longer for monetary policy than it is for fiscal policY. O Statements 2 and 3 only. O Statement 3 only. O All statements. O Statements 1 and 2 only.
Policy? Statement 1: An inside lag exists between the time a policy change is needed and the time the Fed identifies the problem and decides which policy tool to use. The inside lag for monetary policy is shorter than for fiscal policy because fiscal polic is usually the result of a long political budget process. Statement 2: An outside lag occurs between the time a policy decision is made and the time the policy change has its effe on the economy. Statement 3: The total lag (inside plus outside lags) is longer for monetary policy than it is for fiscal policY. O Statements 2 and 3 only. O Statement 3 only. O All statements. O Statements 1 and 2 only.
Chapter16: Macro Policy Debate: Active Or Passive?
Section: Chapter Questions
Problem 3.4P
Related questions
Question
![Which of the following statements is (are) correct with regard to Lags in Monetary Policy versus Fiscal Policy?
Statement 1: An inside lag exists between the time a policy change is needed and the time the Fed identifies the problem
and decides which policy tool to use. The inside lag for monetary policy is shorter than for fiscal policy because fiscal policy
is usually the result of a long political budget process.
Statement 2: An outside lag occurs between the time a policy decision is made and the time the policy change has its effect
on the economy.
Statement 3: The total lag (inside plus outside lags) is longer for monetary policy than it is for fiscal policy.
O Statements 2 and 3 only.
O Statement 3 only.
O All statements.
O Statements 1 änd 2 only.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F22f275da-02fe-4116-9507-027aed335396%2F820d1b92-857e-4571-93a1-02472928ea4a%2Frkbfat_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Which of the following statements is (are) correct with regard to Lags in Monetary Policy versus Fiscal Policy?
Statement 1: An inside lag exists between the time a policy change is needed and the time the Fed identifies the problem
and decides which policy tool to use. The inside lag for monetary policy is shorter than for fiscal policy because fiscal policy
is usually the result of a long political budget process.
Statement 2: An outside lag occurs between the time a policy decision is made and the time the policy change has its effect
on the economy.
Statement 3: The total lag (inside plus outside lags) is longer for monetary policy than it is for fiscal policy.
O Statements 2 and 3 only.
O Statement 3 only.
O All statements.
O Statements 1 änd 2 only.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ECON MACRO](https://www.bartleby.com/isbn_cover_images/9781337000529/9781337000529_smallCoverImage.gif)
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Macroeconomics: Principles and Policy (MindTap Co…](https://www.bartleby.com/isbn_cover_images/9781305280601/9781305280601_smallCoverImage.gif)
Macroeconomics: Principles and Policy (MindTap Co…
Economics
ISBN:
9781305280601
Author:
William J. Baumol, Alan S. Blinder
Publisher:
Cengage Learning
![ECON MACRO](https://www.bartleby.com/isbn_cover_images/9781337000529/9781337000529_smallCoverImage.gif)
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Macroeconomics: Principles and Policy (MindTap Co…](https://www.bartleby.com/isbn_cover_images/9781305280601/9781305280601_smallCoverImage.gif)
Macroeconomics: Principles and Policy (MindTap Co…
Economics
ISBN:
9781305280601
Author:
William J. Baumol, Alan S. Blinder
Publisher:
Cengage Learning
![Economics:](https://www.bartleby.com/isbn_cover_images/9781285859460/9781285859460_smallCoverImage.gif)
![Brief Principles of Macroeconomics (MindTap Cours…](https://www.bartleby.com/isbn_cover_images/9781337091985/9781337091985_smallCoverImage.gif)
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning