According to the Lucas critique, when economists evaluate alternative policies they must take into consideration:
A)how the policies will affect expectations and behaviour.
B)whether the policy will offset the impact of automatic stabilizers.
C)the stage of the political business cycle in which the policy is to be implemented.
D)the length of the inside lags associated with the policies.

Question

Quizplus · Accepted Answer

The Lucas critique emphasizes that economic policies can change people's expectations and behaviors, which in turn can alter the outcomes of those policies.

According to the Lucas Critique, When Economists Evaluate Alternative Policies