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The '''Lucas aggregate supply function''' or '''Lucas''' "'''surprise'''" '''supply function''', based on the '''Lucas imperfect information model''', is a representation of [[aggregate supply]] based on the work of [[New classical macroeconomics|new classical]] economist [[Robert Lucas, Jr.|Robert Lucas]]. The model states that [[economic output]] is a function of money or price "surprise". The model accounts for the empirically based trade off between output and prices represented by the [[Phillips curve]], but the function breaks from the Phillips curve since only unanticipated price level changes lead to changes in output.<ref>{{cite book |first=Olivier Jean |last=Blanchard |authorlink=Olivier Blanchard |first2=Stanley |last2=Fischer |authorlink2=Stanley Fischer |chapter=The Lucas Model |title=Lectures on Macroeconomics |___location=Cambridge |publisher=MIT Press |year=1989 |isbn=0-262-02283-4 |chapterurl={{Google books |plainurl=yes |id=j_zs7htz9moC |page=358 }} |pages=356–360 [p. 358] }}</ref> The model accounts for empirically observed short-run correlations between output and prices, but maintains the [[neutrality of money]] (the absence of a price or money supply relationship with output and employment) in the long-run. The [[Policy Ineffectiveness Proposition|policy ineffectiveness proposition]] extends the model by arguing that, since people with [[rational expectations]] cannot be systematically surprised by [[monetary policy]], monetary policy cannot be used to systematically influence the economy.
== Background ==
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