Question

Which of these is an example of inside lag in monetary policy?

a. Congress debates funding new highways.
b. Banks hold more reserves than they are required.
c. The Fed lowers interest rates several months into a recession.
d. Corporations expand years after the Fed lowers interest rates.

Answer 1

C. The Fed lowers interest rates several months into a recession.   wolf93 is correct. 

Answer 2

The correct answer is C. The Fed lowers interest rates several months into a recession. It's a lag because they could've done it sooner and helped with the recession sooner but decided not to and thus they created a lag in monetary policy of a federation. It's like if the congress refused to help with the recession for no reason for a few months.