What is a house price bubble

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Reference no: EM131304178

An article in the New York Times quoted former Fed Chairman Alan Greenspan as arguing in 2010: "The global house price bubble was a consequence of lower interest rates, but it was long-term interest rates that galvanized home asset prices, not the overnight rates of central banks, as has become the seemingly conventional wisdom."

a. What is a "house price bubble"?

b. Why would long-term interest rates have a closer connection to house prices than overnight interest rates?

c. Why would it matter to Greenspan whether low long-term interest rates were more responsible for the housing bubble than low short-term interest rates?

Reference no: EM131304178

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