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During certain economic crises we have witnessed stock prices soaring prior to the crises(1980,2008) taking hold and prices substantially declining as recessionary influences occur, causing
During certain economic crises we have witnessed stock prices soaring prior to the crises(1980,2008) taking hold and prices substantially declining as recessionary influences occur, causing significant drop in stock prices. Economists would state that bubbles in market prices had been created prior to the crises. Describe how governments can utilize an economic model to prick such stock market bubbles to normalize stock market price and assist in the development of fiscal policy. Describe the model and give examples.
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