Stock market bubbles are welfare enhancing since they relax financial constraints and allows constrained firms to invest in positive NPV projects which was otherwise not possible. Following this...

Extracted text: Stock market bubbles are welfare enhancing since they relax financial constraints and allows constrained firms to invest in positive NPV projects which was otherwise not possible. Following this finding, a government intent on improving corporate welfare could inject liquidity in the firm finance market and this should boost investment spending for even the constrained firms. Bubbles are essentially liquidity in this framework. Select one: O True O False