CA Foundation · Business Economics · Business Cycles
Business cycles are described as 'synchronic' or 'contagious' in nature. What does this characteristic mean?
Synchronic or contagious means that a fluctuation starting in one sector or country spreads to other sectors and countries through linkages in demand, income, employment and trade. It does not mean every industry peaks simultaneously, nor that the cycle can be removed by one policy.
- AFluctuations in one sector spread to other sectors and often to other countriesCorrect
- BEvery industry reaches its peak in the same month of the year
- CCycles can be completely eliminated by a single policy action
- DThe cycle affects only the prices of consumer goods
Explanation
Because sectors are interlinked, a downturn or boom in one industry passes to others through demand, income and employment. Trade and finance links carry it across countries. The claim that all industries peak in the same month is an exaggeration, as timing and intensity differ.
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