CA Foundation Economics Chapter 5 MCQs Business Cycles

Students should practice CA Foundation Economics Chapter 5 MCQs Business Cycles – CA Foundation Economics MCQ with Answers based on the latest syllabus.

Business Cycles CA Foundation MCQ Economics Chapter 5

Introduction:

1. The term business cycle refers to _________.
(a) The ups and downs in production of commodities.
(b) The fluctuating levels of economic activity over a period of time.
(c) Decline in economic activities over prolonged period of time.
(d) Increasing unemployment rate and diminishing rate of savings.
Answer:
(b) The fluctuating levels of economic activity over a period of time.

2. The economy-wide fluctuations in production, trade and general economic activity is referred as :
(a) Business Cycle
(b) Economic cycle
(c) Boom-bust Cycle
(d) All of the above.
Answer:
(d) All of the above.

3. Greatest depression suffered by economy in which year.
(a) 1924
(b) 1930
(c) 2008
(d) 2009
Answer:
(b) 1930

4. Which is not related to great depression of 1930?
(a) It stated in USA
(b) John Maynard Keynes regarded lower aggregate expenditure as the cause
(c) Excess Money Supply
(d) Both (a) and (b)
Answer:
(c) Excess Money Supply

CA Foundation Economics Chapter 5 MCQs Business Cycles

5. The business Cycles or the periodic booms and slumps in economic activities reflect the _________ in economic activities.
(a) Upward movements
(b) Downward movements
(c) Upward and downward move-ments
(d) Extreme rise
Answer:
(c) Upward and downward move-ments

6. Select the odd out:
(a) Expansion
(b) Boom
(c) Upswing
(d) Trough
Answer:
(d) Trough

7. _________ represents the steady growth lien or the growth of the economy when there are no business cycles.
(a) Peak
(b) Trend
(c) Depression
(d) Expansion
Answer:
(b) Trend

8. The four phases of the business cycle are _________.
(a) Peak, recession, trough, and boom
(b) Peak, depression, trough, and boom
(c) Peak, recession, trough, and recovery
(d) Peak, depression, bust, and boom
Answer:
(c) Peak, recession, trough, and recovery

9. _________ state continues till there is full employment of resources and production is at its maximum possible level using available productive resources.
(a) Expansion
(b) Peak
(c) Contraction
(d) Depression
Answer:
(a) Expansion

10. The different phases of a business cycle _________
(a) Do not have the same length and severity
(b) Expansion phase always last more than ten years
(c) Last many years and are difficult to get over in short periods
(d) None of the above
Answer:
(a) Do not have the same length and severity

11. In _________ phase, the overall economic activities (i.e. Production and Employment) are at the lowest level.
(a) Expansion
(b) Trough
(c) Peak
(d) Bottom
Answer:
(b) Trough

CA Foundation Economics Chapter 5 MCQs Business Cycles

12. Peaks and troughs of the business cycle are known collectively as _________.
(a) Volatility.
(b) Turning points.
(c) Equilibrium points.
(d) Real business cycle events.
Answer:
(b) Turning points.

13. The expansion phase is characterized by high growth rate. What is the next phase after expansion?
(a) Peak
(b) Contraction
(c) Downstream
(d) None of the above
Answer:
(a) Peak

14. Which of the following does not occur during an expansion?
(a) Consumer purchases of all types of goods tend to increase.
(b) Employment increases as demand for labour rises.
(c) Business profits and business confidence tend to increase
(d) None of the above.
Answer:
(d) None of the above.

15. Which phase is the Highest point of the business Cycle?
(a) Upswing
(b) Downswing
(c) Peak
(d) Trough
Answer:
(c) Peak

16. _________ is the turning point and the beginning of recession.
(a) Contraction
(b) Depression
(c) Upswing
(d) Boom
Answer:
(a) Contraction

17. A significant decline in general economic activity extending over a period of time is _________.
(a) Business cycle
(b) Contraction phase
(c) Recession
(d) Recovery
Answer:
(c) Recession

18. 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.
Answer:
(a) Contraction.

19. Economic recession shares all of these characteristics except.
(a) Fall in the levels of investment, employment
(b) Incomes of wage and interest earners gradually decline resulting in decreased demand for goods and services
(c) Investor confidence is adversely affected and new investments may not be forthcoming
(d) Increase in the price of inputs due to increased demand for inputs
Answer:
(d) Increase in the price of inputs due to increased demand for inputs

20. Which one of the following is not a feature of Contraction?
(a) Decrease in input demand pulls input prices down
(b) Increases of wage and interest earns gradually decline
(c) Producers lower their prices in order to dispose of their inventories
(d) Business Firms become optimistic about future state of economy.
Answer:
(d) Business Firms become optimistic about future state of economy.

CA Foundation Economics Chapter 5 MCQs Business Cycles

21. During recession, the unemployment rate and output
(a) Rises; falls
(b) Rises; rises
(c) Falls; rises
(d) Falls; falls
Answer:
(a) Rises; falls

22. _________ phase of business cycle marks the end of pessimism and the beginning of optimism.
(a) Recovery
(b) Depression
(c) Upswing
(d) Downswing
Answer:
(a) Recovery

23. The trough of a business cycle occurs when _________ hits its lowest point.
(a) Inflation in the economy
(b) The money supply
(c) Aggregate economic activity
(d) The unemployment rate
Answer:
(c) Aggregate economic activity

24. The lowest point in the business cycle is referred to as the _________.
(a) Expansion.
(b) Boom.
(c) Peak.
(d) Trough.
Answer:
(d) Trough.

25. The period 1929-33 is cited for _________ of world economy.
(a) Great depression
(b) Great Recovery
(c) Great upswing
(d) Great downswing
Answer:
(a) Great depression

26. In Recovery phase of business Cycle, the process of reversal is initially felt in the _________.
(a) Capital market
(b) Labour market
(c) Production level
(d) Financial market.
Answer:
(b) Labour market

27. Boom and depreciation in business cycle are
(a) Turning points
(b) Equilibrium points
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Turning points

28. Which of the following is not the phase of business cycles?
(a) Prosperity
(b) Upswing
(c) Reconstruction
(d) Depression
Answer:
(c) Reconstruction

29. Which of the following is not an example of coincident indicator?
(a) Industrial production
(b) Inflation
(c) Retail sales
(d) New orders for plant and equipment
Answer:
(d) New orders for plant and equipment

30. Leading economic indicators _________.
(a) Are used to forecast probable shifts in economic policies
(b) Are generally used to forecast economic fluctuations
(c) Are indicators of stock prices existing in an economy
(d) Are indicators of probable recession and depression
Answer:
(b) Are generally used to forecast economic fluctuations

CA Foundation Economics Chapter 5 MCQs Business Cycles

31. A leading indicator is _________.
(a) A variable that tends to move along with the level of economic activity.
(b) A variable that tends to move in advance of aggregate economic activity.
(c) A variable that tends to move consequent on the level of aggregate economic activity.
(d) None of the above.
Answer:
(b) A variable that tends to move in advance of aggregate economic activity.

32. A variable that tends to move later than aggregate economic activity is called _________.
(a) A leading variable.
(b) A coincident variable.
(c) A lagging variable.
(d) A cyclical variable.
Answer:
(c) A lagging variable.

33. Which of the following best describes a typical business cycle?
(a) Economic expansions are followed by economic contractions.
(b) Inflation is followed by rising income and unemployment.
(c) Economic expansions are followed by economic growth and development.
(d) Stagflation is followed by inflationary economic growth.
Answer:
(a) Economic expansions are followed by economic contractions.

34. Which of the following is true about leading indicators?
(a) Measurable economic factors
(b) Changes after real output
(c) Both (a) and (b)
(d) None
Answer:
(a) Measurable economic factors

35. Last stage of recession is called:
(a) Depreciation
(b) Recovery
(c) Slowdown
(d) All of these
Answer:
(a) Depreciation

36. When once peak is reached, increase in demand is salted, then _________ phase begins?
(a) Trough
(b) Contraction
(c) Expansion
(d) Trend
Answer:
(b) Contraction

37. Which of the following macro economic variables would you include in an index of leading economic indi-cators?
(a) Employment
(b) Inflation
(c) Real interest rates
(d) Presidential investment
Answer:
(d) Presidential investment

38. An economic variable that moves in the opposite direction as aggregate economic activity down in expansions, up in contractions is called.
(a) Procyclical
(b) Countercyclical
(c) A cyclical
(d) A leading variable
Answer:
(b) Countercyclical

39. Fashion Retailer is business of?
(a) Cyclical business
(b) Sun rise business
(c) Sluggish business
(d) None of these
Answer:
(a) Cyclical business

40. Rampant unemployment is found in:
(a) Boom
(b) Recovery
(c) Contraction
(d) Depression
Answer:
(d) Depression

41. Economics activities will be declining in the phase of _________.
(a) Expansion
(b) Depression
(c) Contraction
(d) Peak
Answer:
(c) Contraction

42. In the later stages of expansion, inputs are difficult to find as they are _________ of their demand and there-fore & input prices _________.
(a) Short, increase
(b) Excess, increases
(c) Short, decrease
(d) Excess, decrease
Answer:
(a) Short, increase

43. The economy cannot continue to grow endlessly. Once Peak is reached, _________ in demand is halted & starts _________ in certain sectors.
(a) Increase, decreasing
(b) Decrease, Increasing
(c) Increase, Increasing
(d) Decrease, Decreasing.
Answer:
(a) Increase, decreasing

44. _________ is the severe form of _________.
(a) Depression, Recovery
(b) Depression, Recession
(c) Recession, Depreciation
(d) Recession, Recovery.
Answer:
(b) Depression, Recession

45. Thegreat depression of _________ is still cited for the enormous misery and human sufferings it caused.
(a) 1929- 1930
(b) 1929- 1931
(c) 1929 – 1932
(d) 1929 – 1933
Answer:
(d) 1929 – 1933

46. Which of the following statement is False?
(a) No economy follows a perfectly timed Cycle.
(b) Business Cycles vary in intensity and length.
(c) There is no set pattern which Business Cycles follow.
(d) Every Business Cycle has relatively longer period.
Answer:
(d) Every Business Cycle has relatively longer period.

47. Industries that are extremely sensitive to the business cycle are the _________.
(a) Durable goods and service sec-tors.
(b) Non-durable goods and service sectors.
(c) Capital goods and non-durable goods sectors.
(d) Capital goods and durable goods sectors.
Answer:
(d) Capital goods and durable goods sectors.

48. Business Cycle occurs _________.
(a) Periodically
(b) In different phases
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

49. Features of business cycles include?
(a) Discuss periodically
(b) Have four different phases
(c) Originate in free Market Economy
(d) All of the above.
Answer:
(d) All of the above.

50. Which of the following is not a characteristic of business cycles _________.
(a) Business cycles have serious consequences on the well being of the society.
(b) Business cycles occur periodically, although they do not exhibit the same regularity.
(c) Business cycles have uniform characteristics and causes.
(d) Business cycles are contagious and unpredictable.
Answer:
(c) Business cycles have uniform characteristics and causes.

CA Foundation Economics Chapter 5 MCQs Business Cycles

51. Which is not the characteristic feature of expansion phase in business cycle?
(a) Increase in national output
(b) Unemployment
(c) Rise in price and costs
(d) Boost in business confidence
Answer:
(b) Unemployment

52. Business Cycles are exceedingly Complex phenomena because.
(a) They do not have uniform characteristics and causes.
(b) They are caused by varying factor.
(c) It is difficult to make an accurate prediction of trade cycles before their occurrence.
(d) All of the above
Answer:
(d) All of the above

53. Repercussions of Business Cycles get simultaneously felt on the economic variable:
(a) Output and employment.
(b) Investment & Consumption
(c) Interest, Trade & Price levels
(d) All of the above.
Answer:
(d) All of the above.

54. Business Cycles have _________ consequences on the well-being of the society.
(a) Some
(b) Serious
(c) No
(d) Moderate
Answer:
(b) Serious

55. What is incorrect about business Cycle?
(a) They occur periodically
(b) They exhibit same regularity
(c) The duration of Cycles vary
(d) The intercity of fluctuations also varies.
Answer:
(b) They exhibit same regularity

56. The disturbances in one or more Sectors _________ other Sectors.
(a) Do not affect
(b) Equally affect
(c) Gets easily transmitted to all
(d) None of the above.
Answer:
(c) Gets easily transmitted to all

57. Business Cycles may occur due to _________.
(a) External Causes
(b) Internal Causes
(c) Both (a) and (b)
(d) None
Answer:
(c) Both (a) and (b)

58. According to some economists, _________ are the prime causes of business cycles.
(a) Fluctuations in effective demand
(b) Fluctuations in investments
(c) Macroeconomic policies
(d) All of the above
Answer:
(d) All of the above

59. Which internal factor affect the Business cycle?
(a) Fluctuations in investment
(b) Natural factors
(c) Technology shocks
(d) Population growth
Answer:
(a) Fluctuations in investment

60. The internal causes of business cycle is _________.
(a) Fluctuation in effective demand
(b) Technology shocks
(c) Both (a) and (b)
(d) None
Answer:
(a) Fluctuation in effective demand

61. A decrease in government spending would cause _________.
(a) The aggregate demand curve to shift to the right.
(b) The aggregate demand curve to shift to the left.
(c) A movement down and to the right along the aggregate demand curve.
(d) A movement up and to the left along the aggregate demand curve.
Answer:
(b) The aggregate demand curve to shift to the left.

62. Modern business activities are based on the anticipations of business community and are affected by waves of optimism or pessimism, according to _________.
(a) External Causes
(b) Internal Causes
(c) Both (a) & (b)
(d) Either (a) or (b)
Answer:
(a) External Causes

63. According to _________ trade cycles occur due to onset of in-novations.
(a) Hawtrev
(b) ADAM Smith
(c) J M Kevnes
(d) Schumpeter
Answer:
(d) Schumpeter

64. Whose statement out of these is false?
(a) Hawtrey – “Trade cycle is purely Monetary phenomena”
(b) Keynes – “Fluctuations in aggre-gate Demand”
(c) Pigou – “Fluctuations in invest-ment”
(d) Schumpeter – “Innovations”
Answer:
(c) Pigou – “Fluctuations in invest-ment”

65. The most probable outcome of an increase in the money supply is _________.
(a) Interest rates to rise, investment spending to rise, and aggregate demand to rise.
(b) Interest rates to rise, investment spending to fall, and aggregate demand to fall.
(c) Interest rates to fall, investment spending to rise, and aggregate demand to rise.
(d) Interest rates to fall, investment spending to fall, and aggregate demand to fall.
Answer:
(c) Interest rates to fall, investment spending to rise, and aggregate demand to rise.

CA Foundation Economics Chapter 5 MCQs Business Cycles

66. In the long run, a reduction in labour supply would cause output to _________ and the aggregate price level to _________.
(a) Fall, rise
(b) Fall, fall
(c) Rise, fall
(d) Rise, rise.
Answer:
(a) Fall, rise

67. Endogenous factors refers to _________ causes:
(a) Internal
(b) External
(c) Economic
(d) Ecological
Answer:
(a) Internal

68. According to which economist trade cycle is a purely monetary for phenomenon _________.
(a) Schumpeter
(b) Pigou
(c) Hawtrey
(d) Marshall
Answer:
(c) Hawtrey

69. The difference between exports and imports is the _________ for goods and Services.
(a) Not foreign demand
(b) Gross Foreign demand
(c) Net Outflow
(d) Net Inflow
Answer:
(a) Not foreign demand

70. The external causes which may lead to boom or bust do not include:
(a) Psychological Factors
(b) Wars
(c) Technology Shocks
(d) Natural Factors
Answer:
(a) Psychological Factors

71. _________ theory holds that business cycles result from the fact that present prices substantially influence the production at some future date.
(a) Schumpeter’s
(b) Hawtrev’s
(c) Cobweb
(d) Pigou’s
Answer:
(c) Cobweb

72. Who propounded the Cobweb theory?
(a) Nicholas Kaldor
(b) Hawtrey
(c) Adam Smith
(d) Schumpeter
Answer:
(a) Nicholas Kaldor

73. According to _________, Trade Cycle is a purely monetary phenom-enon.
(a) Nicholas Kaldor
(b) Hawtrey
(c) Adam Smith
(d) Schumpeter
Answer:
(b) Hawtrey

74. According to _________, modern business activities are based on the anticipations of business Community and one affected by waves of optimism or pessimism.
(a) Pigou
(b) Schumpeter
(c) Adam Smith
(d) Hawtrey
Answer:
(a) Pigou

75. In a free market economy, where maximization of profits is the aim of business, a higher level of aggregate demand will induce businessmen to produce more. As a request, there will be more _________.
(a) Output
(b) Income
(c) Employment
(d) All of these
Answer:
(d) All of these

76. When companies lay off workers, consumers lose their jobs and stop buying anything but necessitates. That causes a _________.
(a) Downward Spiral
(b) Cross Spiral
(c) Upward Spiral
(d) Triangle Spiral
Answer:
(a) Downward Spiral

77. _________ is considered to be the most volatile Component of the aggregate demand.
(a) Investment Spending
(b) Saving Flow
(c) Expenditure behaviour
(d) None of these
Answer:
(a) Investment Spending

78. Investments may rise when the rate of interest is _________ in the economy.
(a) High
(b) Moderate
(c) Low
(d) Very high
Answer:
(c) Low

79. Increase in investment; shift the aggregate demand to the _________, leading to _________.
(a) Right, economic expansion
(b) Right, depression
(c) Left, economic expansion
(d) Left, depression.
Answer:
(a) Right, economic expansion

80. The most common method of boosting aggregate demand is _________.
(a) Increased Government Spending
(b) Tax Cuts
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Both (a) & (b)

81. The macroeconomic policies which cause business Cycles may be :
(a) Monetary Policy
(b) Fiscal Policy
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Both (a) & (b)

CA Foundation Economics Chapter 5 MCQs Business Cycles

82. In case of softening of interest rates, _________.
(a) There will be inflationary effects and increase in unemployment rates.
(b) There will be deflationary effects and increase in unemployment rates.
(c) There will be inflationary effect and decline in employment rates.
(d) There will be deflationary effects and decline in employment rates.
Answer:
(c) There will be inflationary effect and decline in employment rates.

83. Which of the following is anti-inflationary measure which causes a downward pressure on the aggregate demand and the economy slows down?
(a) Reduction in Government Spending.
(b) Increase in Taxes
(c) Increase in Interest Rates
(d) All of these.
Answer:
(d) All of these.

84. How many phases are their in business cycle?
(a) Four
(b) Five
(c) One
(d) Many
Answer:
(a) Four

85. Business Cycles effect _________ of an economy.
(a) Social Aspects
(b) Economic Aspects
(c) All Aspects
(d) No Aspects
Answer:
(c) All Aspects

86. The period of prosperity opens up new and superior opportunities for _________ thereby promotes business.
(a) Investment and Unemployment
(b) Employment and Production
(c) Production, Unemployment & Savings
(d) Investment, Employment and Production
Answer:
(d) Investment, Employment and Production

87. A period of _________ reduces business opportunities and profits.
(a) Recession
(b) Depression
(c) Either (a) or (b)
(d) None of these
Answer:
(c) Either (a) or (b)

88. Business Cycles have _________ influence on Business decisions.
(a) Negligible
(b) Least
(c) No
(d) Tremendous
Answer:
(d) Tremendous

89. Which External Factor affect the business cycle?
(a) Population growth
(b) Variation in government spending
(c) Money supply
(d) Macro economic policies
Answer:
(a) Population growth

90. Economy-wide trends can have significant impact on _________.
(a) Capital Goods Industries
(b) FMCG Industries
(c) Social activities
(d) All types of business.
Answer:
(d) All types of business.

CA Foundation Economics Chapter 5 MCQs Business Cycles

91. Business cycle is contagious and _________ in character?
(a) Local
(b) Regional
(c) National
(d) International
Answer:
(d) International

92. Businesses whose fortunes are closely linked to the rate of economic growth are referred to as business.
(a) FMCG
(b) Durable goods
(c) Fluctuating
(d) Cyclical
Answer:
(d) Cyclical

93. The world economy suffered the longest, deepest and most widespread depreciation of the 20th century during?
(a) 1934
(b) 1928
(c) 1930
(d) 1932
Answer:
(c) 1930

94. Which of the following business are examples of “Cyclical business”
(a) Fashion retailers, electrical goods & house-builders
(b) Restaurants, advertising and overseas tour operators
(c) Construction and other infrastructure firms
(d) All of the above
Answer:
(d) All of the above

95. The Stage/phase of the business Cycle is important for _________.
(a) Making managerial decisions regarding expansion or down-sizing.
(b) A new business to decide on entry into the market.
(c) The success of a new product.
(d) All of the above.
Answer:
(d) All of the above.

96. Due to recession, employment rate and output _________ respectively.
(a) Rises and rises
(b) Falls and falls
(c) Rises and falls
(d) All of the above
Answer:
(b) Falls and falls

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