Question

350- to 700-word analysis assessing how 1 of the following major economic events influenced supply, demand, and economic equilibrium in the US economic activity:

The dot-com bubble from 1994 to 2000, and the subsequent dot-com crash

Answer 1

The dot-com bubble was also acknowledged as the dot com bubble or tech bubble was a bubble in the stock market which was resulted due to an immense amount of speculation in those companies which were related to the internet. This has led to a very quick rise and fall of the bubble market in the US stock exchange. This scenario emerged during the late 1990s in the USA. This period has seen a remarkable increase in the use of the internet and its adoption. The stock market index in Nasdaq was raised by 400% between 1995 to 2000. The year 2000 was the period in which there was a boom in the stock market and it reached its peak. But the market crashes to 78% in the year 2002. Due to the crash, many companies were not able to survive and they shut their businesses. The companies were Pets.com,Boo.com, Global crossing, etc. There were also companies like Amazon who survived the crash and still they are operating in a very large area. Some companies after facing huge losses but managed to survive like Cisco who have faced 86% loss but managed to survive the market crash.

The effect of this crash was very negative on the market which was borne by the investors. But on the other side, the price of the products and services declined and people have to pay less for enjoying the low prices. It was a situation where the paper wealth was collapsed. The paper wealth is te bonds and other investments in the form of paper. The people have more to spend and that is why the demand increases. But the investors who were owing the shares of the overvalued funds have a feeling of reduced wealth due to the crash. It was a situation somewhat similar to depression. The stock market crash never brings a positive effect on the economy. The over speculation of the prices of the stocks had created an illusion that was not present. This has created a false image of the stocks and the investors were the ones who faced a lot of consequences after the companies who were not able to survive in the crash.