Lucas argues that when policies change,expectations will change thereby
A)changing the relationships in econometric models.
B)causing the government to abandon its discretionary stance.
C)forcing the Fed to keep its deliberations secret.
D)making it easier to predict the effects of policy changes.

Question

Quizplus · Accepted Answer

Lucas argues that when policies change, agents will form new expectations based on the new policy, which will in turn change their behavior and the relationships in econometric models. Therefore, policy changes will change the relationships in econometric models, making it more difficult to predict the effects of policy changes accurately.

Lucas Argues That When Policies Change,expectations Will Change Thereby