One Timing Problem in Using Fiscal Policy to Counter a Recession

question 83

Multiple Choice

One timing problem in using fiscal policy to counter a recession is the "administrative lag" that occurs between the:

• A) Start of the recession and the time it takes to recognize that the recession has started
• B) Start of a predicted recession and the actual start of the recession
• C) Time fiscal action is taken and the time that the action has its effect on the economy
• D) Time the need for the fiscal action is recognized and the time that the action is taken

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Definitions:

Effective Rate

The actual interest rate of an investment or loan, taking into account the effects of compounding.

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal sum twice a year, causing the interest to earn interest.

Strip Bond

A type of bond where the principal and regular coupon payments have been separated and are sold individually as zero-coupon bonds.

Interest

The cost of borrowing money, typically expressed as a percentage of the borrowed amount, paid by the borrower to the lender.