Which of the Following Statements Is True About Fiscal Policy

question 35

Multiple Choice

Which of the following statements is true about fiscal policy lags?

• A) Automatic stabilizers have a much shorter impact lag than discretionary fiscal policy.
• B) Although the recognition lag is equally long for discretionary fiscal policy and for automatic stabilizers, the latter avoid implementation lag because automatic stabilizers are triggered automatically.
• C) Unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags.
• D) Although automatic stabilizers have a much shorter lag, discretionary fiscal policy instruments have a more potent impact on the economy because they are more precise.