An asset-price bubble bursts if there is:
A) a panic cycle of asset sales and falling asset prices.
B) a statement from the central bank stating that the bubble is over.
C) an excess demand for an asset that raises asset prices.
D) a sharp decrease in interest rates that pricks the asset-price bubble.

Question

Quizplus · Accepted Answer

A bubble bursts when there is a panic cycle of asset sales and falling asset prices. This happens when investors lose confidence in the asset's value and start selling, creating a self-fulfilling cycle of declining prices. Other factors, such as a statement from the central bank or a decrease in interest rates, may contribute to the burst, but the primary cause is the panic cycle of asset sales.

An Asset-Price Bubble Bursts If There Is