Assume That the Bank of Canada Knows a Demand Shock

question 18

Multiple Choice

Assume that the Bank of Canada knows a demand shock has occurred in the economy.It takes the Bank of Canada two months to adjust policy to the shock,and it takes the economy 14 months for the policy change to affect the economy.The two-month time period refers to the ________,and the following 14-month time period refers to the ________.

• A) policy lag; implementation lag
• B) recognition lag; implementation lag
• C) implementation lag; impact lag
• D) policy lag; recognition lag

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