Which of the following scenarios is an example of a transmission lag? 1--The eco

Question

Which of the following scenarios is an example of a transmission lag?

1--The economy enters a deep recession and Congress passes spending on public works that will take years to plan for and build.

2--The economy enters a deep recession on the same day that new quarterly data show positive economic growth.

3--The economy enters a deep recession, and Congress takes two months to approve an extensive tax cut bill.

Which of the following scenarios is an example of a data lag?

1--Policymakers obtain relevant economic data months after a recession has already begun.

2--A new law requires that all new spending bills go through at least one month of debate before receiving a congressional vote.

3--In response to a recession, Congress passes a spending bill for interstate highway upgrades that will take years to plan and complete.

Explanation / Answer

Transmission Lag: time gap between Policy action that is taken by govt and actual impacts on economy is called transmission lag.

Hence correct option is (1)

Data Lag: Generally data on GDP are released in interval, hence govt has to wait for data to be released before taking any action. This is called data lag.

Hence correct option is (1)

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