what is the difference between inside lag and outside lag course hero

What is the difference between inside lag and outside lag?

The inside lag is the time it takes for policymakers to recognize that a shock has hit the economy and to put the appropriate policies into effect. Once a policy is in place, the outside lag is the amount of time it takes for the policy action to influence the economy.

How do inside lags and outside lags affect?

Its converse is the outside lag (the amount of time before an action by a government or a central bank affects an economy). The inside lag comprises the recognition lag (the time taken to recognize the shock) and the decision lag (the time taken to decide on and pursue a response).

What is outside time lag?

In economics, the outside lag is the amount of time it takes for a government or central bank's actions, in the form of either monetary or fiscal policy, to have a noticeable effect on the economy.

What are inside lags and why do they occur?

Inside legs is the policy problem that occurs when there is delay in implementing policies. This problem occurs because of the time required to identify the problem and when it is identified it takes time to figure out right policies and time to enact them.

What is the difference between inside lag and outside lag quizlet?

The inside lag is the time between a shock to the economy and the policy action responding to the shock. The outside lag is the time between a policy action and its influence on the economy.

What is the difference between easy money and tight money?

In easy money policy, the interest rates are lower, therefore it is easier to borrow, thereby increasing money circulation in the economy. In the tight money policy, the interest rates are higher, therefore it is difficult to borrow and the money circulation will reduce in the economy.

How many types of lags are there?

There are three types of lag in economic policy: the recognition lag, the decision lag, and the effect lag. The recognition lag is the time it takes for the authorities to discover the need to make a change in economic policy.

Which of the following is an example of inside lag in monetary policy?

Which of the following is an example of inside lag in monetary policy? Members of the Board of Governors refuse to lower the discount rate until several months after a recession has begun.

Why is the inside lag short for monetary policy?

The inside lag is estimated to be short for monetary policy but long for fiscal policy. The inside lag is long for fiscal policy because the legislative branch must come to agreement about the appro- priate action. The outside lag, however, is long and variable for monetary policy but very short for fiscal policy. 6.

What are the three components of inside lag?

The three specific inside lags are recognition lag, decision lag, and implementation lag. The one specific outside lag is termed impact lag. Policy lags can reduce the effectiveness of business-cycle stabilization policies and can even destabilize the economy.

Why does monetary policy have such long outside lags?

Monetary policy has such long outside lags because they primarily affect business investment plans. A change in interest rates may not have its full effect on investment spending for several years.

Answer

The answer is : inside lag is the time it takes to formulate a​ policy, outside lag is the time it takes for the policy to work. Inside lag is delay in implementing policy. it can take additional time to enact policies, which is more monetary policy. Outside lag is the time it takes for monetary policy to have an effect.

New questions in Business

You are the Head-Manufacturing of Godrej Industries. You are planning to set up a brand-new Manufacturing plant at a village in rural Maharashtra