Classify each scenario according to the type of policy lag it illustrates. Drag each item on the left to its matching item on the right. Note that every item may not have a match, while some items may have more than one match. implementation lag impact lag recognition lag The economy trends downward for two months, but economists are not sure if this signals the start of a recession. Press Space to open Economists determine that unemployment has skyrocketed several months after it began to rise. Press Space to open Congress passes an immediate tax cut for all citizens, but it is another 24 months before GDP starts to climb once again. Press Space to open Congress approves a $100 million spending package, but officials need six months to determine which projects to finance. Press Space to open Government spending is cut by $100 billion, but inflation persists for another 12 months. Press Space to open A bill proposing a tax cut is held up in Congress by a filibuster.

1. Recognition Lag: There is a Recognition Lag if economists cannot recognize the starting recession with the economy trending downwards for the past two months.

2. Recognition Lag: When Economists cannot determine the skyrocketing of unemployment after several months, it is not due to implementation or impact lag, but a recognition lag.

3. Impact Lag: If Congress passes a tax cut, but the GDP could not climb until after 24 months, it is an impact lag.

4. Implementation Lag: If Congress approves a $100 million spending package, but its implementation takes six months, it is an implementation lag.

5. Impact Lag occurs when inflation persists despite the cutting of Government spending by $100 billion.

6. When a proposal for a tax cut is held up in Congress by a filibuster, it is neither an implementation, impact, nor recognition lag. It is a decision lag, which is not part of the list.

Thus, the scenarios have been classified according to their policy lags.

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