Economic Indicators

Question 1

What are leading indicators?

Answer 1

Indicators that predict future economic activity, useful for forecasting economic conditions.

Question 2

Give examples of leading indicators.

Answer 2

Stock market returns, building permits, and consumer expectations.

Question 3

What are lagging indicators?

Answer 3

Indicators that confirm trends after they have occurred, providing insight into past performance.

Question 4

Give examples of lagging indicators.

Answer 4

Unemployment rate, corporate profits, and labor cost per unit of output.

Question 5

What are coincident indicators?

Answer 5

Indicators that move in line with the economy, providing a snapshot of current economic conditions.

Question 6

Give examples of coincident indicators.

Answer 6

Gross Domestic Product (GDP), industrial production, and personal income.

Question 7

What is Gross Domestic Product (GDP)?

Answer 7

The total market value of all goods and services produced within a country over a period.

Question 8

What is the difference between nominal and real GDP?

Answer 8

Nominal GDP is not adjusted for inflation; real GDP is adjusted for inflation.

Question 9

What does the unemployment rate measure?

Answer 9

The percentage of the labor force that is jobless and actively seeking employment.

Question 10

What is the Consumer Price Index (CPI)?

Answer 10

An index measuring changes in the price level of a basket of consumer goods and services.

Question 11

What is core CPI?

Answer 11

CPI excluding volatile food and energy prices, providing a stable inflation measure.

Question 12

What is the Producer Price Index (PPI)?

Answer 12

An index measuring price changes from the producer’s perspective for raw materials and goods.

Question 13

What role do interest rates play as an economic indicator?

Answer 13

They influence borrowing costs, investment decisions, and economic growth.

Question 14

What does the retail sales report indicate?

Answer 14

Total sales at stores selling durable and non-durable goods, reflecting consumer spending.

Question 15

What is the Industrial Production Index (IPI)?

Answer 15

An index tracking production levels in industries like manufacturing and mining.

Question 16

What does personal income and spending indicate?

Answer 16

The earnings and spending levels of individuals, showing economic strength and consumer confidence.

Question 17

What are housing starts?

Answer 17

The number of new residential construction projects started, indicating future activity in housing.

Question 18

What is the balance of trade?

Answer 18

The difference between a country’s exports and imports, indicating trade surplus or deficit.

Question 19

How do policymakers use economic indicators?

Answer 19

To make decisions on fiscal and monetary policies, adjusting spending, taxation, and interest rates.

Question 20

How do businesses use economic indicators?

Answer 20

To assess market demand, pricing strategies, and production plans.

Question 21

How do investors use economic indicators?

Answer 21

To gauge market trends, allocate assets, and forecast returns.

Question 22

How does the balance of trade affect currency value?

Answer 22

A trade surplus can strengthen currency, while a deficit may weaken it.

Question 23

What is a limitation of lagging indicators?

Answer 23

They may not provide real-time insights, leading to delayed responses.

Question 24

Why can certain indicators like the stock market be unreliable?

Answer 24

They can be volatile and may not always reflect broader economic health.

Question 25

What is a limitation of single economic indicators?

Answer 25

They may not capture the full complexity of the economy; multiple indicators are needed.