A answer I do not agree

[sunbull]

Assume that the Federal Reserve Chairman has decided to sell securities on the open marker while at the same time Congreess has voted to approve a major tax increase on the wealthiest citizens of the U.S. The FED and Congressional policies are likely to have what type of time lag, respectively:
A. Short administrative lag and long impact lag
B. Short administrative lag and short impact lag
The answer is A. But I choose B.nBecause the Schwab book2 page 56 said:" The impact lag is generally shorter for fiscal policy than it is for monetary policy.The shortest impact lag is associated with the fiscal policy of a tax rate change"

 

[JoeyDVivre]

"wealthiest citizens" is the key here. What is Schwab Book 2? Do you mean Schweser?

 

[CFAZod]

I am not certain about the actual process of transacting the sale of securities, but I imagine it is done fairly quickly, meaning the bond buyer's accounts is debited fairly quickly and deposited with the Fed. Meaning money is moved off the street fairly quickly.

Taxing the rich on the other hand will put your a$s to sleep in chambers.

 

[JoeyDVivre]

In general, Fed open market operations like this aren't really sales of securities, they are overnight reverse repos with 20 or so primary dealers. The transactions are essentially instantaneous.

We're still waiting for the trickle-down the Reagan administration promised.

 

[Eazy]

Most operations the Fed would use would be rather quick. Even a full blown sale could probably be put into place in soon (I don't know if there are legislated minimum annoucement times or anything like that). Anything else would be even quicker (as JDV said above). The administration of the tax cut would be quick. It was already approved by Congress which would mean the committee work and economic anlaysis work by the wonks is long since done.

If it was just being introduced to Congress, it could be significantly longer. Same goes for if a Fed President signaled interest in contracting money supply. it could be months before he/she convinced other FOMC voting members to agree, if ever.

Keep in mind that I am not American so these are just my two cents looking through the window from the curb.

 

[AnalyseThis]

From what I have read, A looks correct. It takes at least 6 months for any policy change to show effect.