CA Foundation Business Economics Study Material Chapter 5 Business Cycles – MCQs


1. The term business cycle refers to –
(a) fluctuations in aggregate economic activity over time.
(b) ups and down in the production of goods
(c) increasing unemployment
(d) declining savings

2. Expansion phase all but one of the following characteristics.
(a) Increase in national output
(b) Increase in consumer spending
(c) Excess production capacity of industries
(d) Expansion of bank credit

3. Which one of the following is not the characteristic of business cycle?
(a) They are recurrent
(b) They are not at regular intervals
(c) They have uniform causes
(d) All the above

4. The turning points of the business cycle are
(a) Expansion and Peak
(b) Peak and Contraction
(c) Contraction and Trough
(d) Peak and Trough

5. _____ refers to the top or the highest point of business cycle.
(a) Expansion
(b) Peak
(c) Expansion and Peak
(d) None of the above

6. Involuntary unemployment is almost zero in the _____ phase of business cycle.
(a) Expansion
(b) Contraction
(c) Trough
(d) Depression

7. The economy is said to be overheated at the _____ phase of business cycle.
(a) Expansion
(b) Peak
(c) Contraction
(d) Depression

8. Cost of living increases when business cycle is _____
(a) expanding
(b) contracting
(c) at peak
(d) at lowest point

9. There is large scale of involuntary unemployment in the _____ phase of business cycle.
(a) expansion
(b) peak
(c) contraction
(d) none of the above

10. Fall in the level of investments, fall in production, fall in employment, fall stock prices, etc. are found during _____ phase of business cycle.
(a) expansion
(b) boom
(c) peak
(d) contraction

11. All but one are the endogenous factors of business cycle
(a) War
(b) Changes in government spending
(c) Money supply
(d) Fluctuations in investments

12. _____ is the severe form of recession with lowest level of economic activity.
(a) Upswing
(b) Depression
(c) Downswing
(d) Peak

13. Fall in the interest rates is a typical feature of
(a) recovery
(b) boom
(c) depression
(d) contraction

14. During depression _____ industry suffer from excess production capacity.
(a) capital goods
(b) consumer durable goods
(c) non-durable goods
(d) both ‘a’ and ‘b’

15. The great depression of _____ caused enormous misery and human sufferings
(a) 1929 – 33
(b) 1919 – 23
(c) 1940 – 53
(d) 1950 – 63

16. The lowest level of economic activity is called _____
(a) contraction
(b) trough
(c) recovery
(d) none of the above

17. There is end of pessimism and the beginning of optimism at ______
(a) expansion
(b) peak
(c) trough
(d) depression

18. Which of the following is not the features of business cycle?
(a) Business cycle follow perfectly timed cycle
(b) Business cycle vary in intensity
(c) Business cycle vary in length
(d) Business cycle have no set pattern

19. The trough of a business cycle occur when _____ hits its lowest point.
(a) the money supply
(b) the employment level
(c) inflation in the economy
(d) aggregate economic activity

20. Industries that are most adversely affected by business cycles are the _____
(a) Durable goods and services sector
(b) Non-durable goods and services
(c) Capital goods and Non-durable goods sectors
(d) Capital goods and durable goods sectors

21. _____ indicators change before the economy itself changes.
(a) Lagging
(b) Coincident
(c) Leading
(d) concurrent

22. _____ indicators change after the economy as a whole changes.
(a) Lagging
(b) Coincident
(c) Leading
(d) Concurrent

23. Changes in stock prices, profit margins and profits, manufacturing activity, etc. are examples of _____ indicator.
(a) Leading
(b) Lagging
(c) Concurrent
(d) Coincident

24. A variable that moves later than aggregate economic activity is called _____
(a) a leading variable
(b) a coincident variable
(c) a lagging variable
(d) a cyclical variable

25. While _____ indicators forecast economic fluctuation, _____ indicators confirm the trends.
(a) lagging ; leading
(b) lagging ; coincident
(c) coincident ; leading
(d) leading ; lagging

26. A variable that occur simultaneously with the business cycle movements is _____ indicator.
(a) Leading
(b) Lagging
(c) Coincident
(d) Cyclical

27. Coincident indicators show _____
(a) the current state of business cycle
(b) the rate of change of expansion
(c) the rate of change of contraction
(d) all the above

28. At the time of Great Depression of 1930s, the global GDP fell by around _____
(a) 12%
(b) 14%
(c) 15%
(d) 10%

29. Which one of the following is not correct about business cycle?
(a) They occur simultaneously in all industries and sectors
(b) They affect not only output level but also other related variables
(c) They are international in character
(d) None of the above

30. Which of the following describes best a typical trade cycle?
(a) Economic expansions are followed by economic contractions
(b) Inflation is followed by rising income and employment
(c) Economic expansions are followed by economic growth and development
(d) Stagflation followed by rising employment

31. During upswing, the unemployment rate and output _____
(a) rises ; falls
(b) rises ; rises
(c) falls ; rises
(d) falls ; falls

32. Which of the following does not occur during expansion phase?
(a) Consumer spending increases
(b) Employment increases as demand for labour rises
(c) Business profits and business confidence increase
(d) None of the above

33. When aggregate economic activity is declining, the economy is said to be in _____
(a) contraction
(b) an expansion
(c) a trough
(d) a turning point

34. Which one of the following is not an example of coincident indicator?
(a) GDP
(b) inflation
(c) retail sales
(d) New orders for plant and machinery

35. Which one of the following is an example of lagging indicator?
(a) personal income
(b) new orders for plant and equipment
(c) the consumer price index
(d) slower deliveries

36. _____ is of the view that fluctuations in economic activities are because of fluctuations in aggregate effect demand.
(a) Keyens
(b) Schumpeter
(c) Nicholas Kaldor
(d) Joan Robinson

37. High rate of investment brings _____
(a) high level of employment
(b) increase in the aggregate demand
(c) increase in output
(d) all the above

38. If any unemployment exists during expansion phase of business cycle, it is _____ un employment.
(a) voluntary and frictional
(b) technological and structural
(c) frictional and structural
(d) structural and involuntary

39. The most probable outcome of increase in aggregate demand is _____
(a) expansion of economic activity
(b) contraction of economic activity
(c) stable economic activity
(d) volatile economic activity

40. According to _____ a trade cycles is a purely monetary phenomena
(a) Keyens
(b) Hawtrey
(c) Schumpeter
(d) Nicholas Kaldor

41. Optimistic and pessimistic mood of the business community also affects the economic activities is the view of _____
(a) Hawtrey
(b) Schumpeter
(c) Pigou
(d) Keyens

42. According to _____ trade cycles occur due to onset of innovations
(a) Hawtrey
(b) Adam Smith
(c) JM Keyens
(d) Schumpeter

43. Business cycles appear due to present fluctuations in prices affecting the output and employment in future is _____
(a) Cobweb theory by Nicholas Kaldor
(b) Ordinal theory by Allen & Hicks
(c) Cobweb theory by J.M. Keyens
(d) None of the above

44. Production of _____ goods fall during the war times.
(a) arms and ammunition
(b) non-durable and capital
(c) capital and weapons
(d) capital and consumer

45. During war times most of the productive resources are diverted for the production of
(a) capital goods
(b) consumer goods
(c) weapons and arms
(d) service

46. Economic recession is characterized by all of the following except _____
(a) Decline in investments, employment
(b) Increase in the price of inputs due to increased demand for inputs
(c) Investors confidence is shaken
(d) Demand for goods, services decline

47. Production of new and better goods and services using new technology results in _____
(a) expansion of employment
(b) increase in the incomes and profits
(c) boost to economy
(d) all the above

48. Understanding the business cycle is important for business managers because _____
(a) they affect the demand for their products
(b) they affect their profits
(c) to frame appropriate policies and forward planning
(d) all the above

49. Businesses whose fortunes are closely linked to the rate of economic growth called _____
(a) Cyclical business
(b) Capital good business
(c) Both ‘a’ and ‘b’
(d) None of the above

50. If the population growth rate is higher than the economic growth rate it will result in _____
(a) higher income ; lower savings ; lower employment
(b) lower income ; lower savings ; lower investment
(c) higher investment ; lower income ; higher saving
(d) lower income ; lower savings ; higher employment


CA Foundation Business Economics Study Material Chapter 5 Business Cycles - MCQs answers