Question

The argument that econometric policy evaluation is likely to be misleading if policymakers assume stable economic relationships is known as:

A. the monetarist revolution.
B. the Lucas critique.
C. public choice theory.
D. new Keynesian theory.

Answer 1

B) the Lucas critique.

Step-by-step explanation:

The Lucas critique was developed by Robert Lucas and it states that it is very naive to assume that economic relationships are fixed and don't change. When policymakers study the effects of changing economic policies they cannot use historical data to predict future relationships between economic agents.