Business CyclesPYQ - July 2021Question 88 of 20
All Questions

The four phases of the business cycle are:

Options

Aexpansion, peak, contraction, and trough
Bpeak, depression, bust, and boom
Cpeak, recession, trough, and boom
Dpeak, depression, bust, and recovery
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Correct Answer

✅ Option a — expansion, peak, contraction, and trough

All Options:

  • Aexpansion, peak, contraction, and trough
  • Bpeak, depression, bust, and boom
  • Cpeak, recession, trough, and boom
  • Dpeak, depression, bust, and recovery

Detailed Solution & Explanation

To understand the business cycle, we need to break it down into its phases. • The business cycle refers to the fluctuations in economic activity, which can be explained by the concept of economic growth and contraction. • The four phases of the business cycle are expansion, peak, contraction, and trough, which are based on the changes in the level of economic activity. • Expansion is the phase where the economy grows, and production increases, followed by the peak, which is the highest point of economic activity. • Contraction occurs when the economy starts to decline, and the trough is the lowest point, marking the end of the contraction phase. The correct answer is based on the concept of the business cycle, which is a fundamental principle in business economics. • Options like peak, depression, bust, and boom are incorrect because they do not accurately represent the four phases of the business cycle, as terms like depression and bust are often used to describe more severe economic downturns. • Similarly, peak, recession, trough, and boom are also incorrect because recession is a part of the contraction phase, not a separate phase.

About This Chapter: Business Cycles

Paper

Paper 4: Business Economics

Weightage

5%

Key Topics

Phases, Features, Causes

Business Cycles describe the recurring fluctuations in economic activity — Expansion, Peak, Recession, and Trough. This chapter covers the phases, features, and causes of business cycles, along with theories explaining why economies go through regular boom-bust patterns.

View Official ICAI Syllabus

Exam Strategy Tip

This is a lower-weightage chapter but easy to score. Focus on memorizing the four phases and their characteristics. Questions are usually straightforward.

Key Concepts to Understand

Business Cycle

Fluctuations in economic activity (Expansion, Peak, Contraction, Trough).

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More Questions from Business Cycles

The lowest point in the business cycle is referred to as the:

Which of the following is not an example of coincident indicator?

Features of Business Cycles include:

Which one is an external cause of business cycles?

During expansion phase, employment:

Economic recession shares all of these characteristics except:

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