CA Foundation · Business Economics · Business Cycles
Which of the following best captures the meaning of a business cycle as studied in Business Economics?
A business cycle is the recurrent fluctuation in aggregate economic activity, such as output, employment and income, moving through expansion and contraction in a rough sequence. It is not a one-time shock, steady growth, or a seasonal pattern confined to a single product.
- AA one-time permanent fall in a country's output caused by a natural disaster
- BRecurrent fluctuations in aggregate economic activity, with expansions and contractions occurring in a rough sequenceCorrect
- CA steady and uninterrupted rise in real GDP year after year
- DSeasonal changes in the demand for woollen clothes in winter months
Explanation
A business cycle refers to recurring ups and downs in overall economic activity such as output, employment, income and prices. These movements follow a rough sequence of expansion, peak, contraction and trough. A one-off shock or a seasonal pattern in one product is not a business cycle, and steady growth shows no fluctuation.
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