The _____________ lag is the time between when a shock hits the economy and when a policy responds to it. It is particularly long for _____________ policy.
Ricardian equivalence is the view that
|a.||deficits are intergenerational redistribution from future generations.|
|b.||consumers are forward looking, and therefore recognize that a deficit increases their expected future tax burden. Tax cuts that lead to deficits therefore do not induce more consumption.|
|c.||deficits cannot be accurately measured.|
|d.||when the government cuts taxes and runs a budget deficit, consumers respond to their higher after tax income by spending more.|
The _____________ lag is the time between when a policy action is taken and when it influences the economy. It is particularly long for _____________ policy.
The time inconsistency problem of discretionary policy arises because policy-makers
|a.||fail to fully anticipate all shocks to the economy.|
|b.||want to renege on announced plans after people have acted on their expectations.|
|c.||think that people form expectations adaptively rather than rationally.|
|d.||believe they are better at forecasting economic conditions than they really are.|