When Economists Say That There Is a Time Lag in the Effect

question 7

Multiple Choice

When economists say that there is a time lag in the effect of monetary policy,what do they mean?

• A) That it takes time to observe the effects of fiscal policy on the economy
• B) That the Fed takes awhile to figure out what it wants to do
• C) That the Congress takes awhile to figure out what it wants to do
• D) That it takes time to observe the effects of monetary policy on the economy
• E) That the public needs time to decide how to respond to monetary policy changes.

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Definitions:

Adaptive Value

The extent to which a trait or behavior increases the odds of survival and reproduction for an organism in its environment.

Classical Conditioning

The educational process of repeatedly combining two stimuli; a reaction that initially occurs in response to the second stimulus eventually happens in response to the first stimulus alone.

Scientific Methodology

A systematic approach to research in which a problem is identified, relevant data are gathered, a hypothesis is formulated from these data, and the hypothesis is empirically tested.

Ivan Pavlov

A Russian physiologist known for his work in classical conditioning, particularly his experiments with dogs, leading to the concept of the Pavlovian response.