Outside lags occur because
A) it takes time to identify a problem.
B) firms must change investment plans before monetary policy can be effective.
C) once changes are finally diagnosed and implemented, policies are immediately effective.
D) once a problem is diagnosed, it still takes time to implement policy changes.
B
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Refer to the table above. If the price level is 120, then the aggregate quantity demanded is ________ than the aggregate quantity supplied and the price level ________
A) greater; rises B) greater; falls C) less; rises D) less; falls E) less; might fall, rise or not change depending on whether real GDP is more than, less than, or equal to potential GDP.
New classical economists say that an unanticipated decrease in aggregate demand first:
A. decreases the price level and real output, and then decreases long-run aggregate supply. B. decreases long-run aggregate supply, and then decreases the price level and real output. C. reduces short-run aggregate supply, and then reduces long-run aggregate supply. D. decreases the price level and real output, and then increases short-run aggregate supply such that the economy returns to the full-employment level of output.