One Implication of the Lucas Critique Is That

question 27

Multiple Choice

One implication of the Lucas critique is that:

• A) it takes a long time for a reduction in money growth to reduce the inflation rate.
• B) policy changes should be more effective in changing output than econometric studies suggest.
• C) unemployment is always at its natural rate in the short run.
• D) using a recession to reduce inflation will have disproportionate effects on the poor and disadvantaged.
• E) the decrease in inflation might not require any increase in unemployment.

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Definitions:

Depression

A common and serious medical condition that negatively affects how you feel, the way you think, and how you act, characterized by feelings of sadness, loss, or anger.

Self-Sufficient

The ability of an individual or system to fulfill all their needs without external assistance.

Cognitive Restructuring

A psychotherapeutic process of learning to identify and dispute irrational or maladaptive thoughts known as cognitive distortions, such as "all-or-nothing" thinking.

Pessimistic Attributional Styles

A tendency to habitually explain negative events with causes that are stable, global, and internal.