Home › CA Foundation › Business Economics › Business Cycles › According to the chapter, the recovery process f…
According to the chapter, the recovery process from a trough is FIRST felt in which market?
AThe stock market
BThe labour market
CThe housing market
DThe foreign exchange market
Answer & Solution
Correct answer: B. The labour market
1. After the trough, pessimism ends and optimism begins, reversing the downturn.
2. The chapter says this process of reversal is initially felt in the labour market.
3. Pervasive unemployment forces workers to accept wages below prevailing rates.
4. Producers then anticipate lower costs and a better business environment.
5. This revives investment, credit, employment and demand, sparking recovery.
6. So the first market in which recovery is felt is the labour market.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.3_
Related questions
Which of the following did monetarist economists blame for the Great Depression of the 193Businesses whose fortunes are closely tied to the rate of economic growth, such as house-bAnti-inflationary macroeconomic measures such as cutting government spending and raising tHow does the chapter say population growth running faster than economic growth tends to afWhich of the following is classified in the chapter as an EXTERNAL (exogenous) cause of buPigou explained business fluctuations chiefly in terms of:The innovation theory, which holds that trade cycles arise from innovations introduced intThe view that the trade cycle is a purely monetary phenomenon driven by unplanned changes