Asset prices can have implications for the broader economy from "summary" of The Economics of Money, Banking and Financial Markets, eBook, Global Edition by Frederic S. Mishkin
One key aspect to consider in the field of economics is the relationship between asset prices and the overall economy. Asset prices, such as those of stocks, bonds, and real estate, can have significant implications for the broader economy. When asset prices rise, individuals and businesses may feel wealthier and more confident, leading to increased spending and investment. This can stimulate economic growth and create a positive feedback loop where rising asset prices contribute to further economic expansion.
Conversely, a decline in asset prices can have detrimental effects on the economy. A decrease in the value of assets can erode consumer and business confidence, leading to lower spending and investment. This can result in a slowdown in economic activity and potentially lead to a recession. Asset price fluctuations can also impact the financial sector, as banks and other financial institutions may experience losses on...
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