Final answer:
The total lag for monetary policy typically falls between 3-12 months, encompassing both the quick implementation lag and the significantly longer and more variable impact lag that follows policy action.
Step-by-step explanation:
Economists estimate that the total lag for monetary policy is about 3-12 months. The total lag for monetary policy includes both the implementation lag, which is relatively short, and the impact lag, which can range from six months to two years or more. The implementation lag refers to the time between when a problem is recognized and when policy is enacted, which for monetary policy can be quite swift due to regular Federal Open Market Committee (FOMC) meetings and the ability to quickly buy or sell federal bonds.
However, the impact lag represents the time required for the changes in monetary policy to percolate through the banking system and ultimately affect the broader economy, influencing interest rates, investments, and consumer spending habits. This latter lag can be both long and unpredictable, making it challenging for policymakers to stabilize the economy without sometimes causing further instability.