Question

Which of the following is a critical dilemma when implementing fiscal policy in reference to timing lags?
a)Fiscal policy requires a short and contentious legislative process.
b)Short-term variations in key indicators are common and present randomness in the data.
c)The information lag takes up too much time and is too costly.
d)The economy may already be in a recovery before fiscal policy is enacted.

Answer 1

Answer: Option C

Explanation: In simple words, critical dilemma refers to the confusions and problems that may arise and are pretty hard to solve.

While implementing fiscal policies in an economy the authorities must have proper information however the information takes time and cost to get collected and processed.

This situation is called information lag and is a critical dilemma as the individuals in authority have to decide whether to go for information processing and collecting or not.