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Business cycle


Question 22 (0.75 points) All of the following. except one. are possible causes of the business cycle. Which is the exception? 

  1.  A change in interest rates 



  2. .A change in government spending



  3. A change in the foreign demand for Canadian products. 



  4. 4.An increase in the economic growth rate 


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Option 4  is the correct option.i.e., An increase in the economic growth rate.

1.A change in Interest rate:

   Uneasy Financial conditions may arise to companies and public ,if the interest rates are increased by the Government .If the Government increases the Interest rates then the companies ,Individuals afraid to take loans to make investment.If there is no Investment in the economy then it can lead to slowdown of the country's economy.

So , change in interest rate is one of the possible causes of Business cycle.

2 .A change in government spending:

  A government spending increases the money supply in the economy.If the people have good amount of money then they will spend more on the goods and services. If the government decreases the amount of subsidies to be given then it will inversely affect the financial conditions of the people.Thats the reason government spends amount in infrastructural development to maintain a balance in the economy.

3.A change in the foreign demand for canadian products:

     If there is high demand of products then the organisation purchases bulk material to convert them to products and will appoint large number of employees to reach the consumer demand. This situation increases the employment opportunities,gross profits for the company ,Output produced etc.

This clearly tells us that a change in foreign demand for canadian products will result to changes  in the economy.Exports plays a crucial role .

If the demand of canadian products decreases,then the output will decrease ,Employment opportunities will decrease and Gross profits of the company will also decreases..This will leads to slowdown of the economy.


answered by: Shaik sultan
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