Chapter:

40+ Trade Cycles Solved MCQs

in Macroeconomics 2

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Economics (CBCS) .

Chapters

Take a Test

1.	The term business cycle refers to
A.	Fluctuations in aggregate economic activity over time
B.	Ups and down in the production of goods
C.	Increasing unemployment
D.	Declining savings
Answer» A. Fluctuations in aggregate economic activity over time

discuss

2.	Which one of the following is not the characteristic of business cycle?
A.	They are recurrent
B.	They are not at regular intervals
C.	They have uniform causes
D.	All of the above
Answer» C. They have uniform causes

discuss

3.	The turning points of the business cycle are
A.	Expansion and peak
B.	Peak and Contraction
C.	Contraction and Trough
D.	Peak and Trough
Answer» D. Peak and Trough

discuss

4.	Which of the following is referred to the top or the highest point of business cycle
A.	Expansion
B.	Peak
C.	Expansion and Peak
D.	None of the above
Answer» B. Peak

discuss

5.	Trade cycles are caused by
A.	Fiscal factors
B.	Monetary factors
C.	Both monetary and non-monetary factors
D.	None of the above
Answer» C. Both monetary and non-monetary factors

discuss

6.	During the phase of recovery
A.	Aggregate demand remains constant
B.	Aggregate demand increases
C.	Aggregate demand decreases
D.	None of the above
Answer» B. Aggregate demand increases

discuss

7.	Who stated that “Trade Cycle is purely a monetary phenomenon”.
A.	Keynes
B.	Hawtrey
C.	Crowther
D.	Hayek
Answer» B. Hawtrey

discuss

8.	According to Hayek’s overinvestment theory of trade cycle, fluctuation of investment occurs when
A.	Natural rate of interest is not equal to market rate of interest
B.	Natural rate of interest is equal to market rate of interest
C.	Natural rate of interest is equal to the rate of inflation
D.	None of the above
Answer» A. Natural rate of interest is not equal to market rate of interest

discuss

9.	According to Keynes, in order to fight depression, stabilization policy should include
A.	High rate of taxation
B.	High interest rate
C.	Increased public expenditure
D.	None of the above
Answer» C. Increased public expenditure

discuss

10.	According to Keynes, fluctuations in the volumes of investment is due to
A.	Fluctuations in the volume of savings
B.	Fluctuations in the marginal efficiency of capital
C.	Fluctuations in the marginal efficiency of labour
D.	None of the above
Answer» B. Fluctuations in the marginal efficiency of capital

discuss

11.	During the phases of recession of a trade cycle
A.	Investment, income, employment and demand decline
B.	Investment falls but income rises
C.	Income, employment and investment rise
D.	None of the above
Answer» A. Investment, income, employment and demand decline

discuss

12.	During the downward phase of trade cycle, the central bank of the country should
A.	Increase the cash reserve ratio
B.	Lower-down the cash reserve ratio
C.	Raise the bank rate
D.	None of the above
Answer» B. Lower-down the cash reserve ratio

discuss

13.	During depression, government expenditure on public works will function as
A.	an anti-deflationary tonic
B.	a pumb-priming
C.	compensatory action
D.	None of the above
Answer» B. a pumb-priming

discuss

14.	To attain long-term economic stability, the government can introduce
A.	Compensatory action
B.	Monetary measures
C.	Pumb-priming
D.	an anti-deflationary tonic
Answer» A. Compensatory action

discuss

15.	When the cause of business cycles is attributed to some factor outside the economic system, it is called
A.	A periodical theory
B.	An innovation theory
C.	An exogenous theory
D.	None of the above
Answer» C. An exogenous theory

discuss

16.	During the upward swing of the trade cycle, the central bank of the country will
A.	Raise the cash reserve ratio
B.	Raise the bank rate
C.	Lower down the cash reserve ratio
D.	None of the above
Answer» B. Raise the bank rate

discuss

17.	Who stated that “a sudden collapse of the marginal efficiency of capital leads to crisis”
A.	Keynes
B.	Hawtrey
C.	Hayek
D.	Schumpeter
Answer» A. Keynes

discuss

18.	The trough of a business cycle is referred to as
A.	Expansion
B.	Boom
C.	Trough
D.	Peak
Answer» C. Trough

discuss

19.	When aggregate economic activity is increasing, the economy is said to be in
A.	An expansion
B.	A contraction
C.	A peak
D.	A turning point
Answer» A. An expansion

discuss

20.	When aggregate economic activity is declining, the economy is said to be in
A.	An expansion
B.	A contraction
C.	A peak
D.	A turning point
Answer» B. A contraction

discuss

21.	Peaks and troughs of the business cycle are collectively known as
A.	Volatility
B.	Turning points
C.	Equilibrium points
D.	Real business cycle events
Answer» B. Turning points

discuss

22.	Who officially determines whether the economy is in recession or expansion?
A.	The President of the United States
B.	The U.S Congress
C.	The Federal Reserve Board of Governors
D.	The National Bureau of Economic Research
Answer» D. The National Bureau of Economic Research

discuss

23.	In which way recessions affect the real level ofGDP?
A.	Recessions cause only temporary reduction in real level of GDP
B.	Recessions cause large, permanent reductions in the real level of GDP
C.	Recessions cause both temporary and permanent declines in real level of GDP
D.	None of the above
Answer» C. Recessions cause both temporary and permanent declines in real level of GDP

discuss

24.	Cost of living increases when business cycle is
A.	Expanding
B.	Contracting
C.	At peak
D.	At lowest point
Answer» C. At peak

discuss

25.	All but one are the endogenous factors of business cycle
A.	War
B.	Changes in government spending
C.	Money supply
D.	Fluctuations in investment
Answer» A. War

discuss

26.	Fall in the interest rate is a typical feature of
A.	Recovery
B.	Boom
C.	Depression
D.	Contraction
Answer» C. Depression

discuss

27.	During depression __________industry suffer from excess production capacity
A.	Capital goods
B.	Consumer durable goods
C.	Non-durable goods
D.	Both (a) and (b
Answer» D. Both (a) and (b

discuss

28.	The lowest level of economic activity is called
A.	Contraction
B.	Trough
C.	Recovery
D.	None of them
Answer» B. Trough

discuss

29.	Which of the following is notthe feature of business cycle?
A.	Business cycle follow perfectly timed cycle
B.	Business cycle vary in intensity
C.	Business cycle vary in length
D.	Aggregate economic activity
Answer» A. Business cycle follow perfectly timed cycle

discuss

30.	At the time of Great Depression of 1930s, the global GDP fell by around
A.	12 %
B.	14 %
C.	15 %
D.	10 %
Answer» C. 15 %

discuss

31.	Which of the following describes best a typical trade cycle?
A.	Economic expansions are followed by economic contractions
B.	Inflation is followed by rising income and employment
C.	Economic expansions are followed by economic growth and development
D.	Stagflation followed by rising employment
Answer» A. Economic expansions are followed by economic contractions

discuss

32.	During upswing, the unemployment rate and output
A.	Rises; falls
B.	Rises; rises
C.	Falls; rises
D.	Falls ; falls
Answer» A. Rises; falls

discuss

33.	If any unemployment exists during expansion phase of business cycle, it is
A.	Voluntary and frictional
B.	Technological and structural
C.	Frictional and structural
D.	Structural and involuntary
Answer» C. Frictional and structural

discuss

34.	The most probable outcome of increase in aggregate demand is
A.	Expansion of economic activity
B.	Contraction of economic activity
C.	Stable economic activity
D.	Volatile economic activity
Answer» A. Expansion of economic activity

discuss

35.	Economic recession is characterized by all of the following except
A.	Decline in investment, employment
B.	Increase in the price of inputs due to increased demand for inputs
C.	Investors’ confidence is shaken
D.	Demand for goods, service decline
Answer» B. Increase in the price of inputs due to increased demand for inputs

discuss

36.	Understanding business cycle is important for business managers because
A.	They affect the demand for their products
B.	They affect their profits
C.	To frame appropriate policies and forward planning
D.	All of the above
Answer» D. All of the above

discuss

37.	Which indicators change before the economy itself changes
A.	Lagging
B.	Coincident
C.	Leading
D.	Concurrent
Answer» C. Leading

discuss

38.	Which indicators change after the economy as a whole changes
A.	Lagging
B.	Coincident
C.	Leading
D.	Concurrent
Answer» A. Lagging

discuss

39.	A variable that occur simultaneously with the business cycle movements is
A.	Leading indicator
B.	Lagging indicator
C.	Coincidentindicator
D.	Cyclical indicator
Answer» C. Coincidentindicator

discuss

40.	The principle of accelerator explains the process by which
A.	An increase (or decrease) in the demand for consumption goods leads to an increase (or decrease) in the investment on capital goods
B.	The ratio between induced investment and an initial change in consumption expenditure
C.	An increase (or decrease) in the investment on capital goods leads to an increase (or decrease) in the demand for consumption goods
D.	None of the above
Answer» A. An increase (or decrease) in the demand for consumption goods leads to an increase (or decrease) in the investment on capital goods

discuss

40+ Trade Cycles Solved MCQs

The term business cycle refers to

Which one of the following is not the characteristic of business cycle?

The turning points of the business cycle are

Which of the following is referred to the top or the highest point of business cycle

Trade cycles are caused by

During the phase of recovery

Who stated that “Trade Cycle is purely a monetary phenomenon”.

According to Hayek’s overinvestment theory of trade cycle, fluctuation of investment occurs when

According to Keynes, in order to fight depression, stabilization policy should include

According to Keynes, fluctuations in the volumes of investment is due to

During the phases of recession of a trade cycle

During the downward phase of trade cycle, the central bank of the country should

During depression, government expenditure on public works will function as

To attain long-term economic stability, the government can introduce

When the cause of business cycles is attributed to some factor outside the economic system, it is called

During the upward swing of the trade cycle, the central bank of the country will

Who stated that “a sudden collapse of the marginal efficiency of capital leads to crisis”

The trough of a business cycle is referred to as

When aggregate economic activity is increasing, the economy is said to be in

When aggregate economic activity is declining, the economy is said to be in

Peaks and troughs of the business cycle are collectively known as

Who officially determines whether the economy is in recession or expansion?

In which way recessions affect the real level ofGDP?

Cost of living increases when business cycle is

All but one are the endogenous factors of business cycle

Fall in the interest rate is a typical feature of

During depression __________industry suffer from excess production capacity

The lowest level of economic activity is called

Which of the following is notthe feature of business cycle?

At the time of Great Depression of 1930s, the global GDP fell by around

Which of the following describes best a typical trade cycle?

During upswing, the unemployment rate and output

If any unemployment exists during expansion phase of business cycle, it is

The most probable outcome of increase in aggregate demand is

Economic recession is characterized by all of the following except

Understanding business cycle is important for business managers because

Which indicators change before the economy itself changes

Which indicators change after the economy as a whole changes

A variable that occur simultaneously with the business cycle movements is

The principle of accelerator explains the process by which