Which of the following industry is sensitive to business cycle and price changes?
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A. B. C. D.B
The correct answer is B. Cyclical industry.
A cyclical industry is an industry whose business performance is sensitive to business cycles and macroeconomic factors such as changes in GDP, interest rates, and consumer confidence. These industries experience significant ups and downs in demand for their products and services as the economy goes through cycles of expansion and contraction.
During periods of economic expansion, consumers have more disposable income, businesses expand and invest, and demand for goods and services increases. In contrast, during economic downturns, consumers reduce spending, businesses contract, and demand for goods and services decreases.
Cyclical industries tend to have higher volatility in earnings, sales, and employment levels compared to other industries. Examples of cyclical industries include automotive, construction, and consumer durables such as appliances and furniture.
A growth industry is one that is expanding rapidly, regardless of the overall state of the economy. A defensive industry is one that provides essential goods and services that are in demand, regardless of the state of the economy. An interest-sensitive industry is one whose business performance is sensitive to changes in interest rates, such as the banking industry.