Final answer:
The time lag for fiscal policy is typically longer than that for monetary policy due to the complex and time-consuming legislative and implementation processes involved, making the answer (b) false.
Step-by-step explanation:
The statement that fiscal policy has a shorter outside lag than monetary policy is generally considered false. The typical time lag for fiscal policy includes three main components: the recognition lag, the legislative lag, and the implementation lag. It often takes several months to recognize that an economic downturn has begun, which is known as the recognition lag. After recognizing the economic issue, the development and passage of new fiscal policy take time due to the complex legislative process which is called the legislative lag. Finally, after a bill passes, disbursing funds and starting projects takes additional time, this is known as the implementation lag.
On the other hand, monetary policy managed by the central bank can be altered multiple times throughout the year with potentially quicker effects, as it doesn't have to go through the same extensive legislative process. Therefore, in dealing with economic fluctuations, monetary policy generally has shorter outside lags when compared to fiscal policy.
In conclusion, the time lag for fiscal policy is typically longer than that for monetary policy due to lengthy legislative and implementation processes. Thus, the answer is (b) false.