Which of the following is are a feature of Lucass theory of

Which of the following is (are) a feature of Lucas’s theory of the business cycle?
[1] Involuntary unemployment.
[2] Adaptive expectations.
[3] Only announced changes in monetary policy can have an effect on real output.
[4] Only unexpected changes in inflation lead to changes in employment and output.
[5] All of the above.

Solution

The answer is [1] Inventary unemployment.

Why should involuntary unemployment, be considered an unintelligible disequilibrium concept ?

Given the lack of success of these models when empirically applied, what is unintelligible, is rather to pursue in this reinterpretation of the ups and downs in business cycles and labour markets as equilibria. To Keynes involuntary unemployment is not equatable to actors on the labour market becoming irrational non-optimizers. It is basically a reduction in the range of working-options open to workers, regardless of any volitional optimality choices made on their part. Involuntary unemployment is excess supply of labour. That unemployed in Lucas business cycles models only can be conceived of as having chosen leisure over work is not a substantive argument about real world unemployment.