An asset bubble bursts if there is:
A)a panic cycle of asset sales and falling asset prices.
B)a statement from the central bank stating 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

An asset bubble bursts when there is a panic cycle of asset sales and falling asset prices. This can happen when investors realize that the asset prices have risen too high and are not sustainable, leading to a rush to sell the assets before the prices fall further. This causes a further fall in prices, leading to more panic selling, thus creating a vicious cycle of falling prices and panic selling, ultimately leading to the bursting of the asset bubble.

An Asset Bubble Bursts If There Is