According to the Lucas critique, the effects of changes in economic policy
A) can be determined by looking at macroeconomic data.
B) cannot always be predicted by looking at historical macroeconomic relationships.
C) are easy to predict.
D) do not require macroeconomic theory.
E) are known to the government.

Question

Quizplus · Accepted Answer

The Lucas critique states that the effects of changes in economic policy cannot always be predicted by looking at historical macroeconomic relationships, as people may respond differently to changes in policy than they did in the past. Therefore, option B is the correct answer. The other options are incorrect as they are either contradicted by the Lucas critique or are irrelevant.

According to the Lucas Critique, the Effects of Changes in Economic