Which of the following statements is NOT true?
A) Speculative demand for an asset may contribute to the formation of a bubble.
B) Some asset prices purchased during the formation of a bubble may be rational.
C) Asset price bubbles are always harmful to the general economy.
D) Speculative demand is based on the assumption that the asset price will continue to rise.

Question

Quizplus · Accepted Answer

While asset price bubbles often lead to negative consequences such as crashes and financial instability, it is possible for certain bubbles to have positive effects on the economy (e.g. the dot-com bubble contributed to advancements in technology). However, this statement cannot be generalized as every bubble is unique in its circumstances and impacts. Therefore, statement C is not true.

Which of the Following Statements Is NOT True