Why Some Policymakers Should Worry About The Stock Market

253 Words2 Pages
Policymakers should worry about the stock market. There is a problem when irrational exuberance, which make a bubble in stock, market prices. Stock market bubble happens when the stock market price of a company increase more than their fundamental prices. When there is a case of stock market bubble, stock market price will affect people’s investing decision, and bubbles can misinform people into investing when it is not profitable. Recession may occur due to a period of low investment which causes by over investment. For example, when stock market bubble occurred, the company will rise up their investment in capital goods. This action will make the company owe to the stock price bubble, which the company is purchasing capital goods in a wrong