Question

The Lucas critique indicates that

A. advocates of discretionary policies' criticisms of rational expectations models are well-founded.
B. advocates of discretionary policies' criticisms of rational expectations models are not well-founded.
C. expectations are important in determining the outcome of a discretionary policy.
D. expectations are not important in determining the outcome of a discretionary policy.

Answer 1

C. expectations are important in determining the outcome of a discretionary policy.

Step-by-step explanation:

Lucas Critique -

Robert Lucas was a famous economist and was awarded the 1995 Nobel Prize in the field of economics .

according to the Lucas critique ,

The consciousness of trying to predict the effects of the change in the economic policy completely on the basis of observations in the historical data .

It helps to understand that the expectations are necessary to determine the outcome of any discretionary policy .