Which of the following statements is true?
A) Credit-driven asset bubbles are particularly dangerous. When asset prices fall, the deleveraging of credit markets reduces economic activity.
B) Bubbles driven soley by irrational exuberance lead to a failure of financial institutions.
C) Both A and B are correct.
D) Neither A nor B is correct.

Question

Quizplus · Accepted Answer

Credit-driven asset bubbles are dangerous because they involve excessive borrowing. When the bubble bursts, the need to deleverage can lead to a significant reduction in economic activity.

Which of the Following Statements Is True