CFA Level I · CFA Level I Exam · Fiscal Policy
Policymakers delay a stimulus package because data revealing the downturn were published only months after it started. This delay is best described as a:
This is a recognition lag. It is the delay before policymakers realize the economy has weakened, here due to late publication of data, and it precedes the action and impact lags that further delay fiscal policy's effect.
- Arecognition lagCorrect
- Bimpact lag
- Caction lag
Explanation
The recognition lag is the time needed to identify that the economy has a problem. Action lag covers the time to decide and enact policy, and impact lag is the time for the policy to affect the economy.
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