IGNOU MEC 2 2014 2015 - Lucas’ point of view, what are the limitations of the Keynesian

Question

Lucas’ point of view, what are the limitations of the Keynesian model? What improvements does he suggest?

08 Feb 2018

Answer :

Word Count : 355

One of the most influential economists since the 1970s, he challenged the foundations of macroeconomic theory (previously dominated by the Keynesian economics approach), arguing that amacroeconomic model should be built as an aggregated version of microeconomic models (while noting that aggregation in the theoretical sense may not be possible within a given model). He developed the "Lucas critique" of economic policymaking, which holds that relationships that appear to hold in the economy, such as an apparent relationship between inflation and unemployment, could change in response to changes in economic

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