Answer the question on the basis of the following sequence of events involving fiscal policy:

(1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession.

(3) A tax cut is proposed in Congress.

(4) The tax cut is passed by Congress and signed by the president.

(5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. The operational lag of fiscal policy is reflected in event (s)

a) 1 and 2.

b) 2 and 3.

c) 3 and 4.

d) 4 and 5.

Question

Kirsten Zhang

Business

7 August, 14:30

Answer the question on the basis of the following sequence of events involving fiscal policy:

(1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession.

(3) A tax cut is proposed in Congress.

(4) The tax cut is passed by Congress and signed by the president.

(5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. The operational lag of fiscal policy is reflected in event (s)

a) 1 and 2.

b) 2 and 3.

c) 3 and 4.

d) 4 and 5.

+3

Answers (1)

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Lena Parsons · Answer 1

d) 4 and 5.

Explanation:

Operational lag is the time interval between taking action and the impact of that pertaining action. In this question, No. 4 suggests an action has been taken as the congress passed the tax cut with a sign from the president. No. 5 suggests the impact of that action as the consumers started spending as the cut of taxes, which lead to the recovery of the economy.