When Investors Become Irrationally Optimistic That an Asset's Price Will

question 18

Multiple Choice

When investors become irrationally optimistic that an asset's price will continue to rise,it causes a financial bubble:

• A)to start to inflate.
• B)to be on the verge of bursting.
• C)to burst.
• D)None of these statements is likely.

Identify strategies for individuals and businesses to mitigate the effects of inflation.

Understand how pension programs and employment contracts can adjust to changes in the price level.

Recognize the social and economic costs of unemployment.

Understand the difference between ordinary annuities and annuities due and their valuation.

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Definitions:

Displacement

In psychology, a defense mechanism where an individual redirects emotional impulses from a real object to a safer substitute target.

Sublimation

A defense mechanism where socially unacceptable impulses or idealizations are transformed into socially acceptable actions or behavior.

Denial

A psychological defense mechanism where an individual refuses to accept reality or facts, thereby avoiding facing uncomfortable emotions.

Person-Centered Approach

A psychological approach developed by Carl Rogers that emphasizes human dignity and the self-actualization of individuals, viewing them as inherently good and capable of solving their own problems.