A Consequence of the Impact Lag Is That the Fed

question 14

Multiple Choice

A consequence of the impact lag is that the Fed

• A)may not know the impact of a change in policy.
• B)might not be able to correct a mistaken policy soon enough.
• C)may not have current information about the state of the economy.
• D)may see the impact of a change in policy on inflation, but not economic growth.

---

Definitions:

Monopolistic Competitor

A market structure where many firms sell products that are similar but not identical, thereby having some control over their prices.

Represent

To be a sign or symbol of something; or to act on behalf of someone or something in a legal or formal context.

Monopolistically Competitive Firms

Monopolistically competitive firms operate in a market structure where many companies sell products that are similar but not identical, leading to some degree of market power.

Long-Run Equilibrium

The intersection of the AD and LRAS curves, when wages and prices have adjusted to their final equilibrium levels.