Bubble economy

Bubble economy

1. After going through the assigned readings, one of the most important concepts identified is Foreign Exchange. It has been understood that foreign exchange is vital in economics because it determines the flow of foreign currency within a country. The currency conversion technique is vital because, in a free market, the currency value fluctuates and depends on the supply-demand ratio. Again, currencies fluctuate because countries are more likely to float its currency. A range of market conditions determines the degree to which countries would be benefitted from foreign exchange. International money exchange can be beneficial.

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Another vital concept discovered in the Bubble. In a bubble economy, rapid escalations occur, and asset prices fluctuate. The example of the 1990’s Dot-Com Bubble can be considered. At that time, technology and the internet were rapidly expanding. Investors continued to invest and desired to gain higher returns. However, the outcomes were negative because the market lacks stability. International money exchange can be beneficial.

2. In Managerial Economics, both the concepts of the Bubble economy and Foreign Exchange are vital, and the assigned readings suggest that growth within countries depends on related market conditions. Stability in the market prices varies because companies place the value of a service or product by considering the competitive prices. A foreigner or tourist willing to purchase an item needs to pay for it in the currency of the host nation. Consequently, the concept of foreign exchange appears.

The tourist is supposed to convert the currency into the currency of the host nation, and this is a profitable opportunity for the government to increase its foreign earnings. Depending on the conditions of the free market, the value of the foreign currency changes. The concept of a bubble economy outlines that asset prices tend to escalate, and finally, a contraction occurs. These are unwarranted conditions, and depending on the market behavior, prices fluctuate.