What does Goodhart’s Law imply?

Multiple choice question for Fiscal And Monetary Policy. Select an option, then review the explanation below.

Show Answers

Inferior currency tends to replace superior currency.Monetary policy is effective only when applied over an extended period.Regulating one component of the money supply simply causes that component to lose significance.The money supply should increase only in line with the growth of real national income.

Explanation

Goodhart’s Law states that when a specific aspect of the money supply is regulated, that aspect tends to diminish in importance, as agents shift focus elsewhere.

Practice related questions from the same subject.

1.Why might a government impose taxes on certain goods or services?
2.Which statement accurately describes a regressive tax system?
3.What is the automatic effect on the government's budget balance when the economy experiences growth?
4.If the marginal tax rate is 40% and an individual's income rises from Rs 10,000 to Rs 12,000, what will be the total tax amount paid?
5.Which of the following actions aligns with a reflationary (expansionary) fiscal policy?

What does Goodhart’s Law imply?

Explanation

More Fiscal And Monetary Policy MCQs