Glossary · Macro · Fiscal policy

Policy lags

The delays that make stabilization hard: recognising the problem, deciding what to do, and waiting for the effect. Fiscal policy is slow to decide but fast to act, monetary policy is fast to decide but takes a year or more to work through the economy.

Also called: recognition lag, implementation lag, impact lag

Taught in: Limits of Fiscal Policy

Related terms

Fiscal policy Monetary policy

More from fiscal policy

Automatic stabilizers Budget deficit and national debt Crowding out Marginal propensity to consume (MPC)Spending multiplier Tax multiplier

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