Question

2. Recognition lag is a term used by economists to identify the time it takes to _______________________________.

to shift the economy back onto an expansionary track

to shift the economy back onto an contractionary track

determine that a recession has occurred

to have an effect on the recession

Answer 1

Answer to the question -

2. Recognition lag is a term used by economists to identify the time it takes to determine that a recession has occurred.

Explanation to the answer -

Recognition lag refers to the amount/length of time required to recognise the problem in the economy by the economists/authorities.

Simply, recognition lag is the time gap between occurance of an economic shock ( sudden boom or bust) and it's recognition by the economists.

Recognition lag occurs because -

• Macroeconomic data are not easily and timely available

• Prediction of future course of economic activity is difficult

• Collection and accurate analysis of data is difficult and also much time consuming .  

( Generally a recognition lag lasts for three to six months but the time period may vary depending upon the economic shock. )

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