Do bubbles have to occur? What causes them to start? What pops them?

Do bubbles have to occur?

What causes them to start?

What pops them?

Solutions

Expert Solution

Bubble have to occour due to economic mismanagement and irrational purchasing of assets by investors at any price. Bubbles are often created fiscal stimulation and investors beleive that the prices are not going to fall. There is also fear of missing out.

Bubble are started by fiscal stimulation and high level of demand in the economy which led by inflation and increasing the Asset prices

Bubble will be popped by adverse economic scenario when there will be defaults for the entities or there will be unfavourable situations which can cause Central banks to regulate the economy by adoptation of quantitative tightening and should be regulating the money flow by increasing the interest rate and other harsh measures and they will be leading to uncertainty and investor will be pulling their money out of the market.

jeff jeffy answered 2 years ago

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