Crudely stated, if total spending is low, many businesses will not find it profitable to produce

a large volume of goods and services. Hence, output, employment, and the level of income≫

Will all be low.

3. Is it correct to conclude that all fluctuations in business activity are due only to the business cycles?

A) It is, certainly, true. In other words, it is in the business cycles only that the two development

stages are traced distinctly: (1) an expansion and (2) a crisis which will result in the decline

Of the production.

B) Certainly, it must not be concluded that all changes in business activity are due to the business

cycle. There are seasonal variations in business activity, e.g., the consumer’s boom before

Christmas, Easter, etc. Agriculture, construction, automobile industry are also subject

To seasonal variations.

C) Business activity is also subject to a secular trend (долговременная тенденция) of the economy,

I.e., its expansion or contraction over a long period of years.

4. The business cycle is felt in every nook and cranny of the economy. In what way does the recessism

effect industries producing capital goods and consumer durables?

A) These industries suffer the least as capital investments continue to come in.

B) The state of these industries is not worse than that of others. These industries will save oa

investments and won’t face any difficulties.