Which one is an external cause of business cycles?
Options
AMoney Supply
BTechnology shocks
CInvestment fluctuation
DConsumption pattern
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Business CyclesPYQ - Nov 2019Question 97 of 20
All Questions Correct Answer
✅ Option b — Technology shocks
All Options:
- AMoney Supply
- BTechnology shocks
- CInvestment fluctuation
- DConsumption pattern
Detailed Solution & Explanation
To determine the external cause of business cycles, let's break it down:
• Business cycles refer to the fluctuations in economic activity, typically involving periods of expansion and contraction.
• External causes of business cycles are factors that originate outside the economy and affect its overall performance.
• Technology shocks are sudden changes in technology that can impact the economy, such as a major innovation or discovery, and are considered an external factor.
The correct answer is based on the concept that technology shocks are external to the economic system and can influence the business cycle.
• In contrast, investment fluctuation and consumption pattern are internal factors, as they are driven by the interactions of economic agents within the economy.
• Money supply, while it can be influenced by external factors, is also largely controlled by the central bank, making it not entirely an external cause.
Therefore, technology shocks are the correct answer as they are an external factor that can impact the business cycle.
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 SyllabusExam 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
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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:
During expansion phase, employment:
Economic recession shares all of these characteristics except:
The four phases of the business cycle are:
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