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    Question

    The Lucas Critique asserts

    _______
    A that economic models are always accurate in predicting future outcomes regardless of policy changes. Correct Answer Incorrect Answer
    B that historical relationships between variables become irrelevant once economic policies change. Correct Answer Incorrect Answer
    C that policymakers should always rely on past economic data without considering future expectations. Correct Answer Incorrect Answer
    D that rational expectations have no impact on the effectiveness of new economic policies. Correct Answer Incorrect Answer

    Solution

    The Lucas Critique asserts that historical relationships between variables become irrelevant once economic policies change. It argues that economic models relying solely on past data fail to account for how individuals' expectations and behavior change in response to new policies, making such models unreliable for policy evaluation.

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