CA Foundation · Business Economics · Business Cycles
Which statement about how different sectors typically behave over a business cycle is correct?
Capital goods and durable consumer goods industries show wider fluctuations over the cycle than non-durable necessities. Their purchases can be delayed in a slump and expanded fast in a boom, whereas demand for basic goods like food stays relatively stable.
- ADurable goods and capital goods industries fluctuate more sharply than non-durable consumer goods industriesCorrect
- BFood and other basic necessities industries fluctuate more sharply than capital goods industries
- CAll industries fluctuate by exactly the same percentage
- DCapital goods industries remain stable while consumer non-durables swing widely
Explanation
Purchases of durable and capital goods can be postponed in a downturn and are expanded rapidly in a boom, so these industries swing more. Demand for necessities like food is relatively stable. The reverse claims are therefore wrong.
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