Goodhart's Law suggests that ?
Correct answer: C. controlling one part of the money supply will merely result in that item becoming less important
- A. bad money drives out good
- B. monetary policy can only be effective if it is a long-term policy
- C. controlling one part of the money supply will merely result in that item becoming less important
- D. the money supply must only expand at the rate of growth of real national income
Explanation
Goodhart's Law states that once an economic measure becomes a target, people alter their behaviour so that the measure loses its usefulness. Thus, controlling one monetary aggregate may cause it to become less important or reliable as a guide.
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