BUSINESS CYCLE PART 2
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is a business cycle in the context of macroeconomics?
A business cycle refers to the periodic fluctuations in economic activity, measured by GDP, employment, and industrial output, oscillating between expansion and contraction phases over time.
What is the 'recovery' phase in a business cycle?
Phase where GDP begins rising after reaching the trough.
Which phase of the business cycle is characterized by rising GDP, employment, and consumer spending?
The expansion or recovery phase is characterized by rising GDP, increased employment, and higher consumer and business spending.
What is meant by 'cyclical unemployment' in business cycle theory?
Unemployment caused by economic downturns in the business cycle.
What is the 'peak' in a business cycle?
The peak is the highest point of economic activity in a business cycle, where output and employment reach their maximum levels before the economy begins to contract.
Which phase of the business cycle sees maximum capacity utilization by firms?
The peak phase witnesses maximum capacity utilization.
How does the RBI typically respond during the peak phase of a business cycle?
During the peak phase, RBI usually adopts a contractionary monetary policy by raising the repo rate and increasing the Cash Reserve Ratio (CRR) to control inflation and prevent overheating of the economy.
What is 'inventory investment' and how does it signal a business cycle turn?
Rising inventories signal slowdown; falling inventories signal recovery.
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