EKATVAM ACADEMY

TEST PAPER 1 (CHP-5)

ECONOMICS Marks-30

1. The term business cycle refers to: 6. Economic indicators are:

(a) The ups and downs in (a) A one stroke solution
production of commodities. to check the phase of
(b) The fluctuating levels of economy.
economic activity over a period (b) Indicators showing the
of time. movement of economy.
(c) Decline in economic activities (c) Some activities which
over prolonged period of time. predict the direction of
(d) Increasing unemployment rate economy.
and diminishing rate of (d) Just and illusion.
savings.
7. According to Monetarists,
2. Actual demand stagnates in
business cycles occur due to:
which of the following stage of a
(a) Changes in aggregate
business cycle?
expenditure in economy
(a) Expansion (b) Peak
(b) Innovation
(c) Contraction (d) Recovery
(c) Unplanned changes in
3. The different phases of a business the money supply
cycle: (d) Waves of optimism &
(a) Do not have the same length Pessimism
and severity
(b) Expansion phase always last 8. Features of business cycles
more than ten years include?
(c) Last many years and are (a) Discuss periodically
difficult to get over in short (b) Have four different phases
periods (c) Originate in free Market
(d) None of the above Economy
(d) All of the above
4. Friction unemployment is
9. The rhythmic fluctuations
the characteristic of which
in aggregate economic
of the following stages:
activity that an economy
(a) Expansion (b) Peak
experiences over a period of
(c) Construction (d) Recovery
time is called…………..
(a) Business cycle
5. During the phase of trough of
(b) Recession
business cycle, the growth rate
(c) Contraction phase
became……………
(d) Recovery
(a) Negative (b) Zero
(c) High (d) low
10. Peaks and troughs of the business investment spending to
cycle are known collectively as: rise, and aggregate
(a) Volatility demand to rise.
(b) Turning points (d) Interest rates to fall,
(c) Equilibrium points investment spending to
(d) Real business cycle events fall, and aggregate
demand to fall.
11. According to ____________ trade
cycles occur due to onset of 15. Which of the following is an
innovations. example of a leading
(a) Hawtrey indicator?
(b) ADAM Smith (a) Change in stock prices
(c) J M Keynes (b) Change in
(d) Schumpeter unemployment rate
(c) Change in GDP
12. How many phases are their in (d) Change in commercial
business cycle? lending activity
(a) Four (b) Five
(c) One (d) Many 16. Business that are more
13. The Stage / phase of the vulnerable to charges in
business Cycle is important business cycle and whose
for: fortunes are closely linked to
(a) Making managerial rate of economic growth are
decisions regarding called as ________.
expansion or downsizing. (a) Vulnerable Business
(b) A new business to decide (b) Cyclical Business
on entry into the market. (c) Leading Business
(c) The success of a new (d) Lagging Business
product.
(d) All of the above. 17. Which of the following best
describes a typical business
14. The most probable outcome of an cycle?
increase in the money supply is: (a) Economic expansions are
(a) Interest rates to rise, followed by economic
investment spending to rise, contractions.
and aggregate demand rise (b) Inflation is followed by
(b) Interest rates to rise, rising income and
investment spending to fall, unemployment
and aggregate demand to (c) Economic expansions are
fall. followed by economic
(c) Interest rates to fall, growth and development.
(d) Stagflation is followed by
 Inflationary economic growth distinct phase of
expansion, peak,
18. Which of the following phase occurs contraction and trough
after threat and before peak? (b) Business cycles generally
(a) Boom (b) Recession originate in capitalist
(c) Expansion (d) Depression economies
(c) Business cycles are
19. According to some economists, contagious and are
__________ are the prime causes of internal in character
business cycles. (d) All sectors of the economy
(a) Fluctuations in effective are adversely affected in
demand equal proportion
(b) Fluctuations in investments
(c) Macroeconomic policies 23. __________ is the turning
(d) All of the above point and the beginning of
recession.
20. In case of softening of interest (a) Contraction (b) Depression
rates,______________. (c) Upswing (d) Boom
(a) There will be inflationary 24. Greatest depression suffered
effects and increase in by economy in which year.
unemployment rates. (a) 1924 (b) 1930
(b) There will be deflationary (c) 2008 (d) 2009
effects and increase in
unemployment rates.
25. Which of the following is not a
(c) There will be inflationary variable in the index of leading
effect and decline in indicators?
employment rates. (a) Prime Rate
(d) There will be deflationary (b) Delayed Deliveries
effects and decline in (c) Construction permits
employment rates. (d) New consumer goods
Orders
21. Which business cycle phases are
known as Turning Points? 26. Which economic indicator is
(a) Trough and Depression required to predict the turning
(b) Peak and Trough point of business cycle?
(c) Expansion and (a) Leading indicator
Contraction (b) Lagging indicator
(d) Peak and Boom (c) Coincident
(d) All of the above
22. Which of the following is not correct
about the business cycles? 27. In a free market economy,
(a) Business cycles have where maximization of profits
 is the aim of business, a economic activities.
higher level of aggregate (a) Upward movements
demand will induce (b) Downward movements
businessmen to produce more. (c) Upward and downward
as a request, there will be
movements
more___________.
(a) Output (d) Extreme rise
(b) Income
(c) Employment
(d) All of these

28. The period of prosperity

opens up new and superior
opportunities for __________
thereby promotes business.
(a) Investment and
Unemployment
(b) Employment and Production
(c) Production, Unemployment &
Savings
(d) Investment, Employment and
Production

29. Economic recession shares all of

these characteristics except.
(a) Fall in the levels of investment,
employment
(b) Incomes of wage and interest
earners gradually decline
resulting in decreased demand
for goods and services
(c) Investor confidence is
adversely affected and new
investments may not be
forthcoming
(d) Increase in the price of inputs
due to increased demand for
inputs

30. The business Cycles or the

periodic booms and slumps
in economic activities
reflect the _____________ in