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The document discusses economic bubbles. It notes that a bubble is characterized by a fast increase in asset prices followed by a shrinking. Bubbles are difficult to identify beforehand but easy to see after the fact. Bubbles occur due to market inefficiency where the financial market cannot determine optimal asset prices and prices become wrongly determined. The role of the government is to exercise good monetary policy and regulatory policy to help address bubbles.

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Driss El Hadaoui
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22 views1 page

Homework

The document discusses economic bubbles. It notes that a bubble is characterized by a fast increase in asset prices followed by a shrinking. Bubbles are difficult to identify beforehand but easy to see after the fact. Bubbles occur due to market inefficiency where the financial market cannot determine optimal asset prices and prices become wrongly determined. The role of the government is to exercise good monetary policy and regulatory policy to help address bubbles.

Uploaded by

Driss El Hadaoui
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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EL HADAOUI Driss

1)

A bubble is an economic cycle has a characteristic a fast increase of asset prices followed by
shrinking.
We should care because the bubble is difficult to be identified before- the fact. However, it is easy to
identify after.

2)

A bubble is a question of market inefficiency, which means that the financial market can’t determine
the optimal prices of assets. It’s when the market has wrong determination of prices.

3)

The role of government:

- Exercising of a good monetary policy


- Exercising of regulatory policiy

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