Label the scenarios below with the type of monetary policy lag represented in ea
ID: 1109350 • Letter: L
Question
Label the scenarios below with the type of monetary policy lag represented in each. Despite numerous data trends suggesting a recession, the FOMC waits until their monthly scheduled meeting to change the direction of current monetary policy Implementation Lag Recognition Lag Decision Lag Information Lag Significant revisions to quarterly GDP data and monthly unemployment data delay the identification of the start of a recession Data on GDP is released quarterly, meaning that an economic downturn beginning in January may not be identified until more than 3 months later. Once the Federal Reserve lowers interest rates, businesses and consumers are slow to increase borrowing as a result.Explanation / Answer
1> Implementation Lag
The time lag between when a macroeconomic shock or other adverse condition is recognized by central banks and the government, and when a corrective action is put into place.
2> Recognition Lag
A recognition lag is the time lag between when an actual economic shock and when it is recognized by economists, central bankers, and the government.
3> Information Lag
Information lag is the time it takes for information to be disseminated worldwide.
4> Decision Lag
The decision lag is the period between the time when the need for action is recognized and the time when action is taken.
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