CA Foundation · Business Economics · Business Cycles
Which statement about the phases of a business cycle is correct?
A business cycle is measured from one peak to the next peak, or from one trough to the next trough. The peak is the upper turning point and the trough the lower one, and the cycle includes both expansion and contraction, so the other statements misuse the terms.
- AThe turning point from expansion to contraction is called the trough
- BThe turning point from contraction to expansion is called the peak
- CThe cycle is measured from one peak to the next peak or one trough to the next troughCorrect
- DA cycle consists only of recession and depression, with no upturn
Explanation
A cycle's length is measured between successive peaks or successive troughs. The peak is the upper turning point where expansion ends, and the trough is the lower turning point where contraction ends. The cycle includes both expansion and contraction phases.
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