should the Federal Reserve System react to an asset bubble? This is a very complex question and to answer it you need to research and answer several topics (all answers should not exceed 750 words) Define an asset bubble Spotting the bubble : Generally, it is really hard to spot bubbles with any confidence before they burst. Here, you need to make a point why is it so hard to spot bubbles. Your analysis in this part should revolve around the following question: how can we spot a bubble if we are not sure about the fundamental value of an asset? What can the Fed do? In other words, what are the tools that the Fed can use and can how can the Fed use these tools to address an asset bubble? What we can the Fed do in order to ensure that the financial system is strong enough to withstand the inevitable bursting of a bubble? Conclusions - a summary of your findings.