Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 16

Label each of the following scenarios in which there are problems enacting and applying fiscal policy as being an example of either recognition lag, administrative lag, or operational lag.
a. To fight a recession, Congress has passed a bill to increase infrastructure spending-but the legally required environmental-impact statement for each new project will take at least two years to complete before any building can begin.
b. Distracted by a war that is going badly, inflation reaches 8 percent before politicians take notice.
c. A sudden recession is recognized by politicians, but it takes many months of political deal making before a stimulus bill is finally approved.
d. To fight a recession, the president orders federal agencies to get rid of petty regulations that burden private businesses-but the federal agencies begin by spending a year developing a set of regulations on how to remove petty regulations.