Which of the following is the correct sequence of stages in the business cycle? MCQ with Answer and Explanation

Question
Which of the following is the correct sequence of stages in the business cycle?
A. Contraction, Expansion, Peak, Trough
B. Expansion, Peak, Contraction, Trough
C. Trough, Peak, Expansion, Contraction
D. Peak, Expansion, Trough, Contraction
Answer: Option B
Solution (By JKSSB Mock Tests)
The typical stages of a business cycle are expansion (recovery), peak (boom), contraction (recession) and trough (depression), and then the cycle repeats.
This question belongs to: Economy GK Economy Set 1
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Question #1
The concept of 'Sunk Cost' is important in decision making because:
A. It is a cost already incurred and should be ignored for future decisions
B. It varies with the level of future output
C. It is the only relevant cost for pricing
D. It should always be included in future cost calculations
Discuss
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Correct Answer: Option A

Explanation:
Sunk costs are irreversible costs that have already been incurred. Rational decision-making requires focusing on incremental future costs and benefits, ignoring sunk costs.
This question belongs to: Economy GK Economy Set 1
Question #2
The concept of 'wealth effect' in consumption refers to:
A. consumption increasing when wealth increases
B. saving increasing when wealth falls
C. consumption increasing when debt increases
D. investment increasing when interest rates rise
Discuss
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Correct Answer: Option A

Explanation:
The wealth effect says consumption rises when household wealth rises.
This question belongs to: Economy GK Economy Set 1
Question #3
The concept of 'Narrative Economics' associated with Robert Shiller emphasises:
A. Only the role of monetary policy
B. The role of popular stories and narratives in driving economic fluctuations
C. The complete irrelevance of stories
D. Only the role of fundamental factors
Discuss
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Correct Answer: Option B

Explanation:
Narrative economics studies how contagious popular stories and narratives spread and influence economic behaviour, contributing to booms, recessions and other major economic events.
This question belongs to: Economy GK Economy Set 1
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