Which statement is FALSE regarding credit cycle?

A. Credit cycles drive business cycles.
B. Credit cycles tend to be longer than business cycles.
C. Credit cycles tend to boom ahead of business recessions.

Correct Answer: A

A is not true. There are linkages between credit and business cycles. Some economists regard credit cycles as the fundamental process driving the business cycle. However, mainstream economists believe that the credit cycle cannot fully explain the phenomenon of business cycles. Credit cycles can amplify business cycles, however.