The Lucas Critique Argues That an Econometric Model Constructed Using

question 43

Multiple Choice

The Lucas critique argues that an econometric model constructed using past data

• A)may be appropriate for short-run forecasting,but is inappropriate for policy analysis.
• B)may be appropriate for policy analysis,but is inappropriate for short-run forecasting.
• C)is appropriate for short-run forecasting and policy analysis.
• D)is inappropriate for policy analysis and short-run forecasting.

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Definitions:

Capital-Intensive Department

A division within a company that requires a large investment in capital assets relative to its labor cost.

Single Plantwide Factory Overhead Rate

A method of allocating total factory overhead to products based on a single rate, often using total direct labor hours or machine hours.

Plantwide Factory Overhead Rate

A single overhead absorption rate calculated by dividing total factory overheads by total machine hours or labor hours, applied uniformly across all products and services.

Machine Hours

A measure of the amount of time a machine is operated, used in costing and operational efficiency analysis.