1. Which of the following is NOT a characteristic of a business cycle?
- A. Recurrence of phases
- B. Fluctuations in economic activity
- C. Occurrence at fixed intervals
- D. Phases of expansion and contraction
Business cycles do not occur at fixed intervals. They are irregular, though recurrent. Other options are true characteristics of business cycles.
2. Business cycles are characterized by which of the following?
- A. Alternating periods of prosperity and recession
- B. Constant economic growth without fluctuation
- C. Only decline in economic activity
- D. Continuous rise in GDP
Business cycles represent alternating phases of prosperity (expansion) and recession (contraction), not steady growth.
3. One key characteristic of business cycles is that they:
- A. Affect only agricultural sector
- B. Always last for the same duration
- C. Occur only in developing economies
- D. Spread across all sectors of the economy
Business cycles are economy-wide phenomena that impact multiple sectors, including agriculture, industry, and services.
4. Which statement correctly explains the duration of business cycles?
- A. They always last exactly 10 years
- B. Their duration is uncertain and varies with economic conditions
- C. They occur only once in a century
- D. They repeat every 2 years without fail
The duration of business cycles is not fixed; it can vary depending on domestic and global economic conditions.
5. Business cycles are said to be "cumulative in nature". This means:
- A. Once expansion or contraction begins, it tends to build upon itself
- B. Each phase cancels out the previous one
- C. They occur without any impact on future cycles
- D. They always follow government policy directly
Business cycles are cumulative because once expansion or contraction sets in, it tends to reinforce itself until a turning point occurs.
6. Which phase of the business cycle is characterized by increasing investment, employment, and production?
- A. Peak
- B. Recession
- C. Expansion
- D. Trough
Expansion phase is marked by rising investment, employment, production, and overall economic growth.
7. At which stage of the business cycle does the economy operate at its maximum output, often leading to inflationary pressure?
- A. Peak
- B. Trough
- C. Recession
- D. Recovery
The peak represents the highest point of the business cycle with maximum output, high demand, and often inflationary pressures.
8. Which phase of the business cycle is marked by falling demand, reduced investment, and rising unemployment?
- A. Peak
- B. Expansion
- C. Trough
- D. Recession
Recession is a phase of economic decline where demand, production, and investment fall, and unemployment rises.
9. The lowest point of a business cycle, after which recovery begins, is called:
- A. Recession
- B. Trough
- C. Depression
- D. Peak
The trough is the lowest point in the cycle, marking the end of decline and the beginning of recovery.
10. In which phase of the business cycle does economic activity revive after reaching its lowest point?
- A. Recovery
- B. Recession
- C. Peak
- D. Trough
The recovery phase follows a trough, where economic activity revives with increasing output, income, and employment.
11. Which of the following is considered an internal cause of business cycles?
- A. Wars
- B. Natural calamities
- C. Fluctuations in investment
- D. Global oil price shocks
Internal causes originate within the economy. Fluctuations in investment, demand, and credit are major internal causes of business cycles.
12. Excessive expansion of credit by commercial banks can lead to which business cycle phase?
- A. Boom followed by recession
- B. Permanent growth
- C. Only recovery phase
- D. Stable expansion without decline
Credit expansion fuels investment and boom, but when unsustainable, it leads to recession and decline in economic activity.
13. Which of the following is an external cause of business cycles?
- A. Fluctuations in consumption demand
- B. Variations in credit supply
- C. Investment fluctuations
- D. Political instability and wars
External causes originate outside the economy. Political instability, wars, and natural calamities are major external causes of business cycles.
14. A sudden rise in crude oil prices globally leading to higher inflation in India is an example of:
- A. Internal cause
- B. External cause
- C. Seasonal fluctuation
- D. Structural change
Oil price shocks are an external factor as they originate outside the domestic economy but impact domestic inflation and growth.
15. Which of the following best explains the interaction between internal and external causes of business cycles?
- A. External shocks can amplify internal weaknesses and trigger cycles
- B. Internal causes have no relation to external shocks
- C. Only internal causes matter in business cycles
- D. Only external causes determine business cycles
Business cycles often result from an interaction of internal and external causes, where external shocks intensify existing domestic imbalances.
