Development of fiscal policy

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During various economic crises we have witnessed stock prices soaring prior to the crises (example 1980, 2008) taking hold and prices substantially declining as recessionary influences occur, causing a significant drop in stock prices. Economists would state that bubbles in market prices had been created prior to the crises. In 350 words max describe what bubbles are and how governments might utilize an economic model to help prick such stock market bubbles to normalize stock market prices and assist in the development of fiscal policy. Describe the model formula and give examples how it can be used.

Note with caution that All work must be supported by valid sources of reference.

Reference no: EM133144532

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