It’s often very difficult to get the timing of fiscal policy right. In this chapter, we listed five relevant lags.
a. If each of the lags lasts three months, is the total lag longer or shorter than the typical recession since World War II? For data on the length of recessions, go to www.nber.org/cycles.html. Look at the bottom of the column titled “Contraction.”
b. Of the five lags, the last one only involves watching how things turned out. If there are only four important lags, and they last three months each, will the average recession last longer than the average fiscal policy lag?