Which of the following best describes an "asset price bubble"?
A. A rise in wages due to high employment
B. A sharp drop in consumer spending
C. An unrealistic increase in asset prices due to speculation
D. A government decision to print more money
Answer (1)
The correct answer is letter C. An unrealistic increase in asset prices due to speculationAn asset price bubble happens when people keep buying something—like houses or stocks—believing the price will keep going up, even if it’s no longer based on real value. This happened in the U.S. housing market before the crisis and has happened in other countries, too. For example, in China, property prices in some cities rose too fast, leading experts to worry about a possible bubble. When bubbles pop, prices fall fast, and many people lose money.
