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Which of the following is NOT a feature of the expansion phase of a business cycle?
AAggregate demand and sales rise
BBusiness confidence and profits increase
CFirms shut several production facilities
DNet investment and bank credit expand
Answer & Solution
Correct answer: C. Firms shut several production facilities
1. Expansion is marked by rising output, demand, sales, profits, confidence, investment and bank credit.
2. Rising aggregate demand, rising confidence/profits, and expanding investment/credit are all listed expansion features.
3. Shutting down production facilities is a depression feature, where firms cannot sustain output.
4. So the item that does NOT belong to expansion is the shutdown of facilities.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.2_
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