Based on what we know about asset price formation, what steps can a government use to restrict the formation of an asset price bubble?
A. Lower interest rates in order to discourage savings and investment
B. Loosen lending requirements for banks, which encourages investors to buy bank stock rather than the “bubbling” asset
C. Increase the money supply
D. Raise interest rates in order to increase the costs of financing asset purchases
Answer:D
Based on what we know about asset price formation, what steps can a government use to restrict the formation of an asset price bubble?
A. Lower interest rates in order to discourage savings and investment B. Loosen lending requirements for banks, which encourages investors to buy bank stock rather than the “bubbling” asset C. Increase the money supply D. Raise interest rates in order to increase the costs of financing asset purchases