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When the housing bubble burst, it had a devastating effect on the economy, causing the financial crisis and Great Recession. Many argue that the Fed
When the housing bubble burst, it had a devastating effect on the economy, causing the financial crisis and Great Recession. Many argue that the Fed should stop asset bubbles when they start forming and before they burst. Discuss the pros and cons of the Fed intervening in such conditions.
Also include the following topics:
a) identification of the bubble
b) how the Fed can react to a bubble
c) cost/benefit analysis if the Fed reaction to a bubble
d) few recommendations to make the financial system more resilient to bubbles.
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