Which of the following is an example of inside lag in monetary policy?
(A) The U.S. government debates a public works program and chooses not to spend money on new highways and railroads.
(B) Members of the Board of Governors refuse to lower the discount rate until several months after a recession has begun.
(C) Corporations respond slowly to increases in interest rates by reducing their planned investment for future years.
(D) Individual banks ignore a reduction in the required reserve ratio and hold excess reserves.
Ans: (B) Members of the Board of Governors refuse to lower the discount rate until several months after a recession has begun.
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