The view that past correlations may not apply in the future because policy changes may impact expectations and behavior is consistent with:
A) adaptive expectations.
B) evolutionary adjustment mechanisms.
C) the Lucas critique.
D) the relative adjustment critique.

Question

Quizplus · Accepted Answer

The Lucas critique posits that economic policies cannot be predicted based on historical data alone because people's expectations and behaviors change when policies change, rendering past correlations potentially inapplicable in predicting future outcomes.

The View That Past Correlations May Not Apply in the Future