Question
Why can long fiscal policy lags make policy procyclical?
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Answer
Stimulus or restraint may arrive after conditions have already reversed.
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Question
What is the impact lag in fiscal policy?
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Answer
The delay before enacted policy affects output and employment.
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Question
What is the action lag in fiscal policy?
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Answer
The delay in designing, approving, and implementing fiscal measures.
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Question
What is the recognition lag in fiscal policy?
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Answer
The delay before policymakers realize the economy needs action.
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