Explain how a bubble can develop in the market for an asset
What will be an ideal response?
Investors imitating each other can help to fuel a speculative bubble. In a bubble, the price of an asset rises above its fundamental value. Once a bubble begins, investors may buy assets not to hold them but to resell them quickly at a profit, even if the investors know that the prices are greater than the assets' fundamental values. This increased demand for the asset causes its price to further exceed the fundamental value.
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What is Moore's Law?
What will be an ideal response?
During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________
A) rises; rises B) rises; falls C) rises; does not change D) falls; rises E) does not change; falls
If the economy is experiencing an inflationary gap, classical economists argue that the Federal Reserve should lower interest rates
a. True b. False Indicate whether the statement is true or false
The Consumer Price Index excludes all of the following, except one. Which one is included in the CPI?
a. Services purchased directly by consumers b. Raw materials c. Services purchased by the government d. Machinery purchased by firms e. Intermediate goods purchased by firms