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

Question

Quizplus · Accepted Answer

The Lucas critique argues that the effects of changes in economic policy cannot always be predicted by looking at historical macroeconomic relationships because agents in the economy may change their behavior in response to the policy change. Therefore, it is not easy to predict the effects of economic policy changes.

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