Describe an asset price bubble and give examples. Explain why it is extremely difficult if not impossible for the Federal Reserve to prevent such bubbles
A price bubble is an increase in the price of an asset that goes far beyond what can be justified by improving fundamentals. Recent examples include technology sector stocks in 2000 and real estate values in 2006 . It is difficult for the Fed to prevent such bubbles because it is difficult to determine when a bubble is occurring. After the fact the situation is obvious to all analysts that a bubble existed but it is more difficult to draw such conclusions before the fact. In addition, the Fed does not have policy tools that it can direct specifically at one industry or one sector in which a bubble might exist. Instead, the Fed's actions will impact the entire economy as opposed to a specific type of asset.
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The figure above shows the U.S. supply of labor curve. What was the effect of the decline in birth rates during the 1960s and 1970s on the supply of labor curve in the 1980s?
A) a leftward shift of the supply of labor curve B) a rightward shift of the supply of labor curve C) a movement downward along the supply of labor curve from a point such as A to a point such as B D) The supply of labor curve became steeper. E) None of the above answers is correct because there was no change in the supply of labor curve.
The trade-to-GDP ratio for a nation that had $600 million in exports, $400 million in imports, and GDP of $2,000 million would be
A) 0.1. B) 0.2. C) 0.5. D) -0.1.
Advertising intended to reach as many consumers as possible, typically through television, newspaper, or magazine ads is referred to as
A) interactive advertising. B) direct marketing. C) mass marketing. D) subliminal advertising.
What does a monopolist's demand curve for labor look like? How does it compare to the market demand curve for a competitive industry? Assuming the monopoly purchases factors of production in a perfectly competitive market, what does the supply curve of labor to a monopolist look like? Explain.
What will be an ideal response?