"Animal spirits"—optimism about and predictions for the current and future state of markets—can fuel increased spending on things like homes and financial instruments, even when those "spirits" are not based on concrete information. If the Federal Reserve or other government entities feel that increased spending on real estate isn't merited by actual economic conditions and is leading to an asset price bubble, in your opinion, should they intervene? It depends on how certain the government is that a price bubble exists or will exist. No. The government should not tell people how to spend their money. It depends. If the information is exclusive to the government, it should share it. But if the information is publicly available, the government should stay hands-off. Yes. The government has an obligation to step in whenever it can assist with things like price bubbles.
"Animal spirits"—optimism about and predictions for the current and future state of markets—can fuel increased spending on things like homes and financial instruments, even when those "spirits" are not based on concrete information. If the Federal Reserve or other government entities feel that increased spending on real estate isn't merited by actual economic conditions and is leading to an asset price bubble, in your opinion, should they intervene? It depends on how certain the government is that a price bubble exists or will exist. No. The government should not tell people how to spend their money. It depends. If the information is exclusive to the government, it should share it. But if the information is publicly available, the government should stay hands-off. Yes. The government has an obligation to step in whenever it can assist with things like price bubbles.
Chapter15: Monetary Policy
Section: Chapter Questions
Problem 8QP
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"Animal spirits"—optimism about and predictions for the current and future state of markets—can fuel increased spending on things like homes and financial instruments, even when those "spirits" are not based on concrete information. If the Federal Reserve or other government entities feel that increased spending on real estate isn't merited by actual economic conditions and is leading to an asset price bubble, in your opinion, should they intervene?
- It depends on how certain the government is that a price bubble exists or will exist.
- No. The government should not tell people how to spend their money.
- It depends. If the information is exclusive to the government, it should share it. But if the information is publicly available, the government should stay hands-off.
- Yes. The government has an obligation to step in whenever it can assist with things like price bubbles.
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