Canadian Securities Course (CSC) Level 2 Practice Exam

Cyclical industries are indeed characterized by their sensitivity to global economic conditions and are significantly influenced by the expansion and contraction of the USA business cycle. These industries tend to perform well during periods of economic growth when consumer spending increases but often face downturns during recessions when spending declines. For instance, sectors such as automobiles, construction, and luxury goods fall under cyclical industries. When the economy is expanding, consumers have more disposable income, leading to higher demand for these products. Conversely, in a contracting economy, people often cut back on non-essential purchases, impacting the performance of these industries negatively. The other industry types do not share this direct correlation with economic cycles. Defensive industries, for example, remain stable and continue to perform well during economic downturns because they provide essential goods and services. Speculative industries may experience high volatility based on factors other than economic conditions, such as trends and investor sentiment. Commodities and industrial sectors can have varying degrees of sensitivity, but they do not specifically define the broad characteristics associated with cyclical industries.