The Outside Lag Is the Time

question 10

Multiple Choice

The outside lag is the time:

• A) before automatic stabilizers respond to economic activity.
• B) when automatic stabilizers are not effective.
• C) between a shock to the economy and the policy action responding to the shock.
• D) between a policy action and its influence on the economy.

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Definitions:

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Substitutes

Products or services that can be used in place of each other, where an increase in the price of one leads to an increase in the demand for the other.

Optimal Consumption

The mix of consumer purchases that maximizes the utility or satisfaction obtained from a given expenditure level.

Indifference Curve

A graph representing combinations of goods or services among which a consumer is indifferent, meaning they have no preference for one combination over another.