Which of the Following Statements Is True About Fiscal Policy

Multiple Choice

Which of the following statements is true about fiscal policy lags?

A) Automatic stabilizers have a much shorter impact lag than discretionary fiscal policy.
B) Although the recognition lag is equally long for discretionary fiscal policy and for automatic stabilizers, the latter avoid implementation lag because automatic stabilizers are triggered automatically.
C) Unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags.
D) Although automatic stabilizers have a much shorter lag, discretionary fiscal policy instruments have a more potent impact on the economy because they are more precise.