The Lucas critique indicates that

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The Lucas critique suggests that expectations are critical in determining the outcome of a discretionary policy. The policy's success may depend on how the individuals and firms being targeted by the policy's changes in spending and taxation behave in response to the policy. If they are aware of the policy's goals, they may adjust their behavior to take advantage of the policy's goals, resulting in unintended consequences. As a result, the Lucas critique highlights the importance of taking into account agents' expectations while designing and executing macroeconomic policies.

The Lucas Critique Indicates That