CA Foundation · Business Economics · Business Cycles
An economy's real GDP (₹ crore) over six consecutive quarters is: 5,000; 5,200; 5,300; 5,250; 5,150; 5,180. Which of the following correctly identifies the peak quarter, the trough quarter, and the phase during the movement from Q3 to Q5?
Peak is Q3 at ₹5,300 crore, the highest level before output declines. Trough is Q5 at ₹5,150 crore, the lowest point before GDP rises again in Q6. The movement from Q3 to Q5 is therefore contraction, as GDP falls throughout.
- APeak Q2, trough Q5, and Q3 to Q5 is expansion
- BPeak Q3, trough Q5, and Q3 to Q5 is contractionCorrect
- CPeak Q3, trough Q6, and Q3 to Q5 is contraction
- DPeak Q4, trough Q5, and Q3 to Q5 is recovery
Explanation
GDP rises until Q3 (5,300), the highest value, so Q3 is the peak. It then falls to 5,250 and 5,150, and Q5 (5,150) is the lowest before rising to 5,180 in Q6. The fall from Q3 to Q5 is contraction. Q6 is not the trough because it is higher than Q5.
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