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ACTION LAG: In the context of economic policies, a part of the implementation lag involving the time it takes for appropriate policies to be launched once they have been agreed to by policy makers. Another part of the implementation lag is the decision lag. For fiscal policy, this involves appropriating funds to government agencies (for government spending) or changing the tax code (for taxes) For monetary policy, this involves the buying and selling government securities in the open market. The action lag is usually shorter for monetary policy than fiscal policy.

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Lesson 4: Production Possibilities | Unit 1: Getting Started Page: 3 of 24

Topic: Limitations <=PAGE BACK | PAGE NEXT=>

The production possibilities analysis has two main limitations:
  • First, Preferences: This analysis says nothing about which goods people want and which provide the most satisfaction. It only indicates the available options.
  • Second, Economic Efficiency: This analysis does not ensure we have economic efficiency-the combination that would generate the most satisfaction from the resources.

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NET EXPORTS DETERMINANTS

Ceteris paribus factors, other than aggregate income or production, that are held constant when the net exports line is constructed and which cause the net exports line to shift when they change. Some of the more important net exports determinants are global economic conditions, exchange rates, and trade barriers.

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