Monetary Policy and Financial Crises Flashcards

1
Q

2 causes of inflation mainly

A

loose monetary policy

expectations for future by firms and households

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2
Q

what does it mean to buy on the margin

A

buying shares on credit

you can get rich quickly but can also find yourself in debt if prices fall

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3
Q

what does irrational exuberance mean

A

unstable investor enthusiasm eg not questioning the values of shares

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4
Q

3 types of bubbles

A

boom bust
assest price bublle
credit bubble

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5
Q

example of an asset price bubble

A

housing market bubble

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6
Q

what is a bubble

A

dramatic increase in prices far above their fundamental value typically followed bya crash

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7
Q

how might you tell there is a bubble? what are its characteristics

A

rapidly increasing prices
people are denying its a bubble
people feel envy/regret that they havnt participated

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8
Q

causes of bubble

A

innovation(new products, people dont understand its underlying value)
overconfidence
irrational behvaoiur
lax monetary policy

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9
Q

example of innvation caused bubble

A

dot com bubble
tech and internet new

bit coin

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10
Q

4 phases of bubble

A

stealth
awareness
mania
crash

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