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Bubbles are characterized by a [rapid /gradual] [increase/decrease] in the price of a commodity over a...

Bubbles are characterized by a [rapid /gradual] [increase/decrease] in the price of a commodity over a relatively short period of time, followed by a sudden [ sharp/slight ] price [ decrease/increase] .

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Answer #1

Answer.

Bubbles are characterized by a Rapid Increase in the price of a commodity over a relatively short period of time, followed by a sudden Sharp price Decrease.

Explanation.

Asset bubbles are characterized by irrational exuberance that is followed by a sharp decline in the asset class as funds flow out of the asset class. Just as an example, oil surged from $70 per barrel to near $150 per barrel between 2007 and 2008. However, in the second half of 2008, oil crashed to lows of $33 per barrel.

Some of the recent asset market bubbles also include the stock market bubble of year 2000 and the housing bubble of 2007. These bubbles were characterized by rapid increase in price followed by a sharp decline.

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