Most legal systems assume that it is better not to incarcerate a guilty individual than to incarcerate an innocent person (i.e., if you are making a mistake, at least choose the least bad one). As central banks can potentially make a mistake when bursting asset-price bubbles, which of the following support the statement: "it is worse to burst a bubble when it was not necessary then not bursting a bubble when it was needed to." a) because central banks have many policy tools to counteract the effect of a price bubble burst, it is usually considered wiser to leave bubbles alone and eventually act if needed. b) The worst mistake would be to burst a bubble when it was not necessary because the central bank may impose harm to the economy when it was not necessary. c) Most central banks are quite conservative with respect to taking actions against asset-price bubbles since they cannot guarantee a price bubble has occurred. d) All of the above.

Most legal systems assume that it is better not to incarcerate a guilty individual than to incarcerate an innocent person (i.e., if you are making a mistake, at least choose the least bad one). As central banks can potentially make a mistake when bursting asset-price bubbles, which of the following support the statement: "it is worse to burst a bubble when it was not necessary then not bursting a bubble when it was needed to." a) because central banks have many policy tools to counteract the effect of a price bubble burst, it is usually considered wiser to leave bubbles alone and eventually act if needed. b) The worst mistake would be to burst a bubble when it was not necessary because the central bank may impose harm to the economy when it was not necessary. c) Most central banks are quite conservative with respect to taking actions against asset-price bubbles since they cannot guarantee a price bubble has occurred. d) All of the above.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter15: Monetary Policy

Section: Chapter Questions

Problem 6QP

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