Yes it is very developmentally normal for this age. I work with kids this age all day long and focus on development, etc. as it's part of my job. But it is interesting how different children can be. My DS4, similar to your DS7, is very much a truth teller and I keep expecting this phase to hit at some point. But it doesn't with everyone. he's always told on himself and put himself in timeout. Anyhow, when kids this young do start the lying they are just testing things out and figuring out how to serve their own needs (providing they don't see lots of role models lying regularly). They want to see what will happen. It's good to teach them how lying effects others and how they would feel if others lied to them (at this age just having a little 2 min. conversation about it is sufficient). Most things I have read say ease up on kids lying around this age. Address it, but don't go overboard about it because it doesn't meant they will have a lifetime of lying. But I know how that isn't always easy to do. I say address it, talk about the effect, have some consequence for it and move on. If it's more of a pattern, like dazed and confused said I have talked with kids about not being sure what to believe if they don't tell me the truth. But with little things that I know are stories, I emphasize the difference between real and pretend. Like we don't tell a story about someone pushing you in pre-school if it didn't really happen. When it seems fishy I will say "is that real or pretend?" and usually they fess up (usually being the operative word). If they are headstrong I will go further, but again you have to pick your battles and ask yourself is it worth it.
