CA Foundation · Business Economics · Business Cycles
Which of the following sectors typically shows the widest cyclical fluctuations in output during a business cycle?
Consumer durable and capital goods industries fluctuate the most over the business cycle. Buyers can delay purchases of such goods during a downturn and rush to buy them in a boom, whereas demand for necessities like staple foods and essential medicines stays relatively stable.
- AConsumer durable goods and capital goods industriesCorrect
- BBasic food staples such as salt and wheat flour
- CEssential medicines for chronic illness
- DDaily newspaper subscriptions
Explanation
Purchases of durables and capital goods can be postponed in a downturn and are stepped up in a boom, so their output swings strongly. Demand for staples, essential medicines and similar necessities is stable, so these sectors fluctuate far less. Hence A is correct.
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