The response lag of stabilization policy represents ?
Correct answer: D. the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented
- A. the time that it takes for policy makers to recognize the existence of boom of bust
- B. the time needed for parliament to agree to a tax cut.
- C. the time that is necessary to put the desired policy into effect
- D. the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented
Explanation
The response lag is the time between implementing a stabilisation policy and the economy’s reaction to it. Recognition and decision-making delays occur before implementation and are different types of policy lag.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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