EBK ECONOMICS: PRINCIPLES AND POLICY
EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9780100605930
Author: Blinder
Publisher: YUZU
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Chapter 31, Problem 1DQ
To determine

Explain the witnessing a bubble.

Expert Solution & Answer
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Explanation of Solution

Here, it is typical argument about whether or not there is a bubble, if price rises then there was not a bubble.  From the year 2000 to year 2005, housing prices increases by 50 percent across the U.S.  This moderately considerable increase also suggests that a bubble existed.  Though, the markets like NY, MIA, and SD, housing prices increases by 77%, 96%, and 118%, respectively.  It is very unlikely that these drastic price increases could have been powered by changes in fundamentals.  Thus, to conclude that assumption on future price increases which means to conclude that a bubble existed at that point in time.

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