The argument that a change in policy systematically alters the structure of econometric models is known as the
A)Keynesian cross.
B)cross-equation restriction.
C)Lucas critique.
D)endogeneity principle.

Question

Quizplus · Accepted Answer

The argument that a change in policy systematically alters the structure of econometric models is known as the Lucas critique, named after economist Robert Lucas. It highlights the importance of considering how individuals and firms might respond to changes in policy when estimating the effects of policy changes on the economy. The Keynesian cross refers to a specific graphical representation of aggregate demand and supply in the short run, cross-equation restrictions refer to constraints imposed on econometric models when estimating multiple equations simultaneously, and the endogeneity principle relates to the potential feedback loops between economic variables, which can complicate econometric analysis.

The Argument That a Change in Policy Systematically Alters the Structure