Macroeconomics, 2nd Edition by Pearson

AGGREGATE DEMAND AND AGGREGATE SUPPLY

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policymakers.

I

NSIDE

LAGS

in macroeconomic policy refer to the delay between

the time a policy change is needed and the time the policy change is imple-

mented. The inside lag comprises three types of lags:

1. Data lag

2. Recognition lag

3. Implementation lag

The data lag involves the time taken before the data that indicates the state

of the economy becomes available. For instance, GDP data is available with a

time lag. Quick estimates are revised and eventually become available as actual

figures, and this process can take a couple of years.

After the data is available, a recognition ...