A situation when an asset price differs from its fundamental value is
A)a random walk.
B)an inflation.
C)a deflation.
D)a bubble.

Question

Quizplus · Accepted Answer

A situation when an asset price differs from its fundamental value is called a bubble. A bubble occurs when market participants bid up the price of an asset beyond its intrinsic value, driven by exuberance and belief in quick profits rather than underlying economic fundamentals. This creates a situation where the asset price becomes disconnected from its underlying value, resulting in a bubble that is likely to eventually burst, leading to a correction in prices.

A Situation When an Asset Price Differs from Its Fundamental