Question

The fact that it takes time for government to identify and recognize a problem is one reason for the occurrence of

a. inside lags.

b. structural lags.

c. implementation lags.

d. outside lags.

Answer 1

Inside lags, it is the span of time that takes for a government to respond in a certain situation that pertains to the economy. There are two lags that comprise inside lag:

1. recognition lag it is the time spend to recognize a shock to the economy

2. decision lag it is the time spent in taking action regarding the shock