The reduction in interest rates by the Reserve Bank also stimulated the demand for housing, and some people argue there is now a house price bubble. Using a graph, explain how asset price bubbles occur and why they are inconsistent with the ‘efficient markets hypothesis.’

Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 11CQ
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The reduction in interest rates by the Reserve Bank also stimulated the demand for housing, and some people argue there is now a house price bubble. Using a graph, explain how asset price bubbles occur and why they are inconsistent with the ‘efficient markets hypothesis.’
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