Evidence suggests that, with rare exceptions, economic policies are not manipulated in an effort to influence electoral outcomes. Use the Lucas critique to explain why not

What will be an ideal response?

The strategy that would generate a political business cycle relies on naive voters to reward office holders for a short-term improvement in economic conditions. Once the strategy is implemented, however, voters get to experience the negative consequences of rising inflation and contractionary policies. Policy makers (and influencers) wise enough to recognize the change in expectations will not be tempted to attempt such a strategy.

Economics

You might also like to view...

An increase in the interest rate in the United States compared to the interest rate in Great Britain will

A) increase the U.S. interest rate differential. B) increase the demand for pounds. C) shift the demand curve for dollars rightward. D) Both answers A and C are correct.

Economics

Which of the following statements about profit maximizing firms in a competitive market is FALSE?

A) Firms earn no economic profit in the long run. B) Marginal revenue does not have to equal marginal cost. C) p - MC = 0. D) Price equals marginal revenue.

Economics