Problem of time lags in enacting and applying fiscal policy

Question

In brief state and evaluate the problem of time lags in enacting & applying fiscal policy. 

Answer 1

This takes time to ascertain the direction wherein the economy is moving (recognition lag), to obtain a fiscal policy enacted into law (administrative lag); and for the policy to have its full influence on the economy (operational lag). In the meantime, other factors may change, rendering inappropriate a specific fiscal policy. Nevertheless, discretionary fiscal policy is a valued tool in preventing severe recession or severe demand-pull inflation.