What are the various time lags that affect discretionary fiscal policy, and what are their effects?
What will be an ideal response?
The recognition lag refers to the time it takes before economic problems can be identified; the action time lag is the time required between recognizing the problem and putting policy into effect; and the effect time lag is the time that elapses between the onset of policy and the results of that policy. The result is that the effects of a change in fiscal policy may take hold only after the problem no longer exists, and may have unintended effects.
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What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?
What will be an ideal response?
The maximin criterion can be defined as which of the following?
A. One seeks the maximum of the minimum payoffs to the various available strategies. B. One seeks the minimum of the maximum losses among the various available strategies. C. One seeks the maximum of the minimum losses to the various available strategies. D. One seeks the maximum of the maximum gains of the various available strategies.