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# CA Foundation | Business Cycles MCQ Test | Chanakya Commerce Classes

CA Foundation Paper 4 Business Economics Chapter 5 Business Cycles MCQ test page with instant scoring by Chanakya Commerce Classes.

Canonical URL: https://www.chanakyaclasses.com/mcqs/business-cycles

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Business Economics MCQ
Business Cycles MCQ Test
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CA Foundation · Paper 4 · Business Economics
Chapter 5 ·
Business Cycles
MCQ Test Page · CA Foundation level · ICAI pattern · instant scoring and answer review
30 MCQs
Foundation Level
Past Exam Style
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Question 01
Business cycle refers to:
a permanent rise in production
recurring fluctuations in economic activity around the growth trend
weekly changes in share prices only
government budget deficit
Business cycles are recurrent fluctuations in aggregate economic activity, especially in output, income, employment and prices.
Question 02
Business cycles are generally associated with fluctuations in:
output only
employment only
prices only
output, income, employment and prices
Business cycles affect major macroeconomic variables together.
Question 03
A key feature of business cycles is that they are:
recurrent but not strictly periodic
perfectly regular every year
always caused by monsoon failure only
limited only to agriculture
Business cycles recur, but their exact duration and intensity are not fixed.
Question 04
The phase of business cycle marked by high output, income and employment is:
depression
recession
prosperity or boom
trough
Boom or prosperity is the expansionary phase with strong economic activity.
Question 05
The phase that follows prosperity is generally:
recovery
recession
revival
stability
After boom, the economy normally enters recession.
Question 06
Recession is a phase in which there is generally:
rapid rise in investment and employment
peak optimism
complete recovery of the economy
decline in output, income and employment
Recession is the contraction phase after boom.
Question 07
The lowest point of a business cycle is called:
trough or depression
peak
expansion
inflation
The trough is the bottom of the cycle, associated with depression conditions.
Question 08
Depression is characterised by:
high profits and rising prices
full employment
very low output, high unemployment and low investment
rapid expansion in bank credit
Depression is the most severe contractionary phase.
Question 09
Recovery phase of business cycle is marked by:
further decline in activity
revival of investment, output and employment
lowest level of prices and profits forever
zero economic activity
Recovery begins when investment and production start rising again.
Question 10
The correct sequence of phases in a business cycle is:
depression → prosperity → recession → recovery
recovery → depression → boom → recession
recession → boom → depression → recovery
prosperity → recession → depression → recovery
This is the standard sequence used in business cycle analysis.
Question 11
At the peak of a business cycle, the economy is closest to:
prosperity
depression
trough
slump only
Peak is the upper turning point of prosperity or boom.
Question 12
One important feature of business cycles is that they are:
confined to a single industry always
completely predictable in timing
widespread or economy-wide in effect
purely agricultural in nature
Business cycles affect large parts of the economy, not just one firm or one sector.
Question 13
During prosperity, employment level is generally:
very low
high
falling sharply in all sectors
zero
Boom usually brings higher production and employment.
Question 14
During depression, prices are generally:
low or falling
rising very rapidly
fixed by firms forever
always unrelated to demand
Weak demand during depression tends to keep prices low or falling.
Question 15
Which of the following is a common symptom of recession?
rapid increase in profit and wages everywhere
full employment and optimism
maximum industrial production
fall in investment and rising unemployment
These are standard recession indicators.
Question 16
Which phase acts as a turning point from contraction to expansion?
boom
recession
trough
inflation
The trough is the lower turning point after which recovery begins.
Question 17
Which one of the following best describes prosperity?
persistent pessimism and low demand
high investment, high output and strong business confidence
collapse of credit
minimum employment
Prosperity is marked by optimism, investment and high activity levels.
Question 18
Business cycles are also known as:
trade cycles
price mechanism only
fiscal deficits
national income accounts
Business cycles are commonly referred to as trade cycles in standard economics texts.
Question 19
Which of the following may contribute to business cycles?
changes in investment
changes in money and credit
changes in expectations
all of these
Business cycles are multi-causal and can arise from investment, credit, innovation, and expectations.
Question 20
Which of the following is most likely during recovery?
further fall in demand and output
complete stagnation of economy
gradual rise in investment and employment
peak inflation with no production increase
Recovery begins slowly and is marked by improving investment and employment.
Question 21
The upper turning point of a business cycle is called:
trough
peak
slump
deflation
Peak is the top turning point after which recession begins.
Question 22
During boom, business expectations are usually:
optimistic
deeply pessimistic
completely absent
fixed by government
Optimism in profits and sales generally supports expansion during boom.
Question 23
Which of the following is likely during depression?
high profits
strong demand for capital goods
heavy new investment
idle capacity and widespread unemployment
These are classic signs of depression.
Question 24
Business cycles mainly reflect fluctuations in:
micro-level personal preferences only
individual consumer taste only
aggregate economic activity
weather alone
Business cycles are macroeconomic in nature and concern aggregate activity.
Question 25
If production, employment and income rise together over time after a trough, the economy is in:
depression
recovery
recession
collapse
This pattern defines recovery or revival.
Question 26
Which of the following is not a normal phase of business cycle?
equity dilution
prosperity
recession
recovery
Equity dilution is a finance concept, not a phase of business cycle.
Question 27
Which statement about business cycles is correct?
they occur with exact equal duration every time
they affect only developed economies
they are caused by a single factor only
their duration and intensity may vary from cycle to cycle
This is a standard feature of business cycles.
Question 28
The phase between peak and trough is:
prosperity only
recovery only
recession or contraction
equilibrium
The movement downward from peak to trough is recession or contraction.
Question 29
Which of the following is likely to improve first in the early stage of recovery?
mass pessimism
business confidence and investment sentiment
collapse in credit
excess idle capacity forever
Recovery usually starts with improved expectations and gradual revival in investment.
Question 30
The broad idea behind business cycle analysis is that economies:
move through alternating periods of expansion and contraction
always remain at full employment
grow in a perfectly straight line
never face fluctuations in aggregate activity
That is the central concept of business cycle theory.
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MCQ Test · Chapter 5 · Business Cycles