The Implementation Lag for Fiscal Policy Is Longer Than for Monetary

question 150

Multiple Choice

The implementation lag for fiscal policy is longer than for monetary policy because

• A) it takes longer for the Fed to act than Congress.
• B) it takes longer for Congress to act than the Fed.
• C) fiscal policy changes more quickly affect behavior than monetary policy changes.
• D) monetary policy changes more quickly affect behavior than than fiscal policy changes.

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Definitions:

Marginal Costs

The change in total production cost that arises when the quantity produced is incremented by one unit, reflecting the cost of producing one additional unit of a good.

Incremental Costs

Costs that change or increase depending on the decisions made by a company, such as starting a new production process or producing more units of a product.

Fixed Costs

Expenses that do not change with the level of production or sales activities, such as rent or salaries.

Marginal Costs

The cost incurred by producing one additional unit of a good or service.