It depends on an ever increasing supply of buyers, betting theyโll be able to sell for a higher price. Eventually, you run out of buyers and the bubble bursts.
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25
What do economists mean when they say โrealโ?
That the price from the past has been adjusted for inflation.
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20
What is the inflation caused by people called? How would you define it?
Demand pull inflation - too much money chasing too few goods.
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What is the inflation cause by the decrease of availability of an important productive resource called?
Cost push inflation.
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What are 2 causes for inflation?
1 If people have more money, they are going to bid up the prices for things, causing inflation. 2 The decrease of availability of a productive resource, as oil.
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What negatively influenced the export of oil from Venezuela?
Economic mis-management and political instability
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Why is the CPI not perfect?
Because the market basket has to be constant and a traditional CPI wonโt adjust for new products or increase in quality. Example, black&white vs 40-inch flat TV
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10
If you have 10 million dollars, are you rich?
Well, if you are on a desert island, you are not. Being rich is determined by how much purchasing power you have, not the amount of money on your bank account.
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25
What do economists mean when they say โnominalโ?
That the price from the past has not been adjusted for inflation.
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On which condition do the prices rise?
Higher demand and lower supply.
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What are โbubblesโ?
Surges in asset prices to level significantly above the fundamental value of that asset.
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What is โspeculationโ?
Trading financial instrument involving high risk, in expectation of significant returns. Like the 2008 financial crisis in the US.
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25
Who is the sugar granddaddy of all bubbles?
The Dutch tulip mania in the 1600s. Tulip gardens became a social fad among the wealthy, driving up their price. More people made money with the tulip action.