1)What is Lucas Critique? 2)The long-run supply curve shows the relationship between _____ (price/quantity supplied) on the horizontal axis and _____ (quantity supplied/price) on the vertical axis

1)Lucas's critique is a concept named after Robert Lucas and used when making policies in macroeconomic. The concept argues that one cannot project accurate conclusions about macroeconomic phenomena using past data. It also suggests that it is unworldly to predict the implications of change on microeconomic policies based on historical data. Besides, the concept states that a change in each policy affects the circumstance occurring in different situations. The critique is used when making the decision rules of the Keynesian models.

2)The long-run supply curve the relationship between the quantities supplied on the horizontal axis and the price on the vertical axis.

The long-run supply curve indicates the price and the general production of a particular economy (real GDP). The curve indicates the long-run changes in prices and their relation to change in the supply quantity at that given period. A price change may change the quantity supplied according to the law of supply. When prices increase, supply quantity also increases, and vice versa. However, in the long-run, price changes are recognized better than in the short-run. Mostly, prices are constant in the short-run and vary in the long-run due to changes in technology, demand, competition, prices, etc.