CFA Practice Question

CFA Practice Question

Which of the following relevant lags is the shortest when it comes to implementing fiscal policy tools in the form of tax law changes?
A. Recognition lag
B. Impact lag
C. Administrative lag
Explanation: Impact lag is the shortest of the lags for tax policy changes, as its impact is felt very fast.

User Contributed Comments 3

User Comment
george2006 impact lag is 6 to 12 months per Notes. The notes only says that Recognition and Admin lags are lengthy.
leftcoast I just remember it as impact leg is the only one that can truly be anticipated. Can't anticipate recognition or whether or not a bill will pass. But once it is passed, people will prepare for the impact before it's even implemented, thus the time will be shortened.
mrpman when a policy takes effect it takes a lot of time to go though legislation, then it gets implemented. When it is implemented it will have an impact which will be shorter because it is immediate, we measure the change in policy effects only after a certain period so by common sense you can rule out the other 2 and see that impact lag will be shorter
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