What Is One Reason for the Existence of Policy Lags

question 126

Multiple Choice

What is one reason for the existence of policy lags?

• A) Government experts are slow in figuring out what is going on.
• B) Households and firms plan their spending in advance and therefore are slow in responding to changes in interest rates.
• C) It is impossible to build an accurate model of the economy.
• D) It is difficult for the Bank of Canada to change the bank rate in a timely manner.

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