This example shows that <u>economic boom periods can overheat and lead to speculative bubbles.</u>
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<h3><u>A Speculative Bubble: What Is It?</u></h3>
A speculative bubble is characterized by a rapid, dramatic price increase that is driven more by market momentum and mood than by underlying fundamentals.
Fundamentals like significant profit growth or hopes of future market dominance at first fuel the speculation, but these fundamentals are eventually overtaken by other factors that don't reflect the real value of the company or industry.
Prices rise when investors rush to buy, thinking that prices will rise further and that if they don't buy, an opportunity will pass them by.
Fundamentals eventually overtake momentum, the bubble bursts, the stock tanks, and prices fall back to their pre-bubble levels.
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Answer:
d. $935.69
Explanation:
The computation of the market price of the bond is shown below:
Given that
Future value be $1,000
RATE = 6.32% ÷ 2 = 3.16%
NPER = 11 × 2 = 22
PMT = $1,000 × 5.5% ÷ 2 = $27.50
The formula is shown below:
=-PV(RATE,NPER,PMT,FV,TYPE)
After applying the above formula, the market price of the bond is $935.69
Answer:
The answer would be neutrality of money theory
Explanation:
The neutrality of money theory claims that changes in the money supply affect the prices of goods, services, and wages but not overall economic productivity. Many of today's economists believe the theory is still applicable, at least over the long run.
Answer: Option E
Explanation: In a free market system the prices of goods and services produced are determined by the market forces of demand and supply. This are also known as open market.
The intervention of govt. in regulating such markets is very minimal. Thus, the control in such markets stands in hands of private owners. Therefore, the private owners produce with the single aim of profit maximization in such economies.
Hence we can conclude that the right option is E.