The Lucas critique noted that:
A) policies are neutral and have no impact.
B) the impact of policy is intensified if the policy is expected.
C) expectations have no impact on the effectiveness of policy.
D) statistical correlations that held in the past may not hold if new policy is adopted.

Question

Quizplus · Accepted Answer

The Lucas critique argues that economic policies cannot rely on historical data alone for their predictions because once a new policy is implemented, people's behavior may change in anticipation of its effects, thus altering the statistical relationships observed in the past.

The Lucas Critique Noted That