Identifying time lags advocates of active policy face several obstacles when implementing discretionary fiscal or monetary policy, such as identifying the economy? s potential output level, the natural rate of unemployment, and the effects of a passive approach. policymakers must also cope with a multitude of time lags that complicate the implementation of active policy. identify the type of time lag illustrated in the following scenario: policymakers have implemented an expansionary monetary policy, but it takes several months for the change. in the federal funds rate to translate into a change in aggregate demand and output. decision-making lag implementation lag recognition lag effectiveness lag