The "Greenspan doctrine" - central banks should not try to prick bubbles - was based on which of the following arguments?
A) Asset-price bubbles are nearly impossible to identify.
B) Monetary actions would be likely to affect asset prices in general, rather than the specific assets that are experiencing a bubble.
C) Raising interest rates has often been found to cause a bubble to burst more severely.
D) Monetary policy actions to prick bubbles can have harmful effects on the aggregate economy.
E) all of the above.

Question

Quizplus · Accepted Answer

The Greenspan doctrine was based on all of the given arguments. Greenspan believed that it was nearly impossible to identify asset-price bubbles and that monetary actions would be likely to affect asset prices in general, rather than the specific assets that are experiencing a bubble. He also argued that raising interest rates has often been found to cause a bubble to burst more severely and that monetary policy actions to prick bubbles can have harmful effects on the aggregate economy.

The "Greenspan Doctrine" - Central Banks Should Not Try to Prick