CA Foundation P4 · Chapter 6 · Question 9 of 15
The theory that business cycles result from waves of optimism and pessimism among businessmen is associated with:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Pigou
Explanation
A. C. Pigou emphasised psychological factors: optimism leads to over-investment and a boom; when errors of optimism are discovered, pessimism sets in and leads to a downturn. Jevons linked cycles to sunspots and Hicks to the multiplier-accelerator interaction.
More Business Cycles MCQs
- Q11The worldwide economic downturn that began with the stock market crash of 1929 is known as:
- Q12A commonly used rule of thumb defines a recession as:
- Q13To counter a recession, the government is most likely to:
- Q14Samuelson and Hicks explained business cycles through the interaction of:
- Q15Which of the following statements about the impact of business cycles is INCORRECT?