Which of the following events will help to burst an asset price bubble?
A) Speculative demand for the asset quickly declines.
B) Speculative demand for the asset quickly increases.
C) New information leads buyers to doubt that prices will continue to increase in the future.
D) A and C are correct

Question

Quizplus · Accepted Answer

If speculative demand for the asset quickly declines, there will be fewer buyers in the market, putting downward pressure on prices. And if new information leads buyers to doubt that prices will continue to increase in the future, they may choose to sell their assets, further driving prices down. Therefore, a combination of both A and C can contribute to bursting an asset price bubble.

Which of the Following Events Will Help to Burst an Asset