Question

Refer to Figure . Suppose it takes policy makers from time t2 to time t3 to see that the economy has started contracting. This is an example of  a response lag.

H B GDP D E to 11 13 14 12 18 15 Time

Select one:

True

False

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Answer #1

False

Explanation-

This is an example of recognition lag. Recognition lag means a delay between when an economic shock occurs and when it is recognized by economists. Where as Response lag is the delay in the affect of economic policies that are implemented to correct market failures.

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