What Is Goodhart's Law

question 63

Multiple Choice

What is Goodhart's Law?

• A) If you control the indicator of a problem, rather than the problem itself, the indicator will lose its indicative value.
• B) Interest rates should be kept as low as possible.
• C) There is no point in trying to use indicators for the formulation of monetary policy.
• D) The money supply cannot be controlled.

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Definitions:

Marginal Product

Marginal product refers to the additional output that is produced by employing one more unit of a particular input, holding other inputs constant.

Average Product

The output produced per unit of input, calculated by dividing total product by the quantity of input.

Marginal Product

Represents the additional output that can be produced by adding one more unit of a specific input, keeping all other inputs constant.

Isoquant

A curve that represents all the combinations of inputs that produce the same level of output in the production of goods.