UNIT 11 QBANK Flashcards
Which of the following is a leading indicator?
A) Corporate profits
B) Wages
C) New orders for consumer goods
D) Gross domestic product
C) New orders for consumer goods
Explanation
New orders for consumer goods is a leading indicator, foretelling future economic activity (the actual purchase of those goods).
Wages and gross domestic product are coincident indicators.
Corporate profits are lagging indicators.
Which of the following can encourage economic growth because gradually increasing prices tend to stimulate business investment?
A) Stagnation
B) Deflation
C) High inflation
D) Mild inflation
D) Mild inflation
Explanation
Inflation is a general increase in prices.
Mild inflation encourages economic growth because gradually increasing prices stimulate business investment.
High inflation reduces a dollar’s buying power, which hurts the economy.
Several months of slow economic growth and rising unemployment have characterized the economy. Market analysts would describe this as a period of
A) deflation.
B) stagflation.
C) stagnation.
D) inflation.
C) stagnation.
Explanation
Stagnation is defined as prolonged periods of slow or little economic growth accompanied by high unemployment.
Economic growth has slowed to a halt with little consumer demand, but prices for goods and services are still rising. This is known as economic
A) stagflation.
B) contraction.
C) stagnation.
D) deflation.
A) stagflation.
Explanation
When prices for goods and services are rising (inflation) during times when the economy isn’t growing (stagnation), the economy is known to be in a period of stagflation.
The measure of the inflation rate is
A) the Consumer Price Index.
B) the business cycle.
C) the S&P 500 Index.
D) the EAFE Index.
A) the Consumer Price Index.
Explanation
Inflation is an increase in prices over time. The consumer price index measures the price of a basket of goods. When comparing the value of this basket of goods, we can identify whether there’s inflation or deflation occurring.
Increasing cost of goods and services and high unemployment are characteristics of
A) inflation.
B) deflation.
C) stagnation.
D) stagflation.
D) stagflation.
Explanation
Stagflation is the rare occurrence where the economy is contracting and income is dropping but prices are still rising.
Which of the following is a coincident indicator?
A) Increase in the duration of unemployment
B) S&P 500 Index
C) Household income
D) Housing starts
C) Household income
Explanation
Personal or household incomes are coincident indicators, moving up and down along with the overall economy.
Equity prices and housing starts are both leading indicators.
Changes in the duration of unemployment is a lagging indicator.
All the following are coincident indicators except
A) changes in durable goods inventories.
B) personal income.
C) trade sales.
D) retail employment.
A) changes in durable goods inventories.
Explanation
Changes in durable goods inventories (whether an increase or decrease) is a leading economic indicator.
Trade sales, retail employment, and personal income are all coincident indicators.
An analyst is trying to determine upcoming economic activity to better determine her recommended investment strategy. She would be most interested in
A) leading indicators.
B) coterminous indicators.
C) lagging indicators.
D) coincident indicators.
A) leading indicators.
Explanation
When someone wants to know what future economic activity may be, she would be most interested in leading indicators. These indicators move in advance of economic activity.
Coincident indicators move along with economic activity, and lagging indicators follow economic activity.
There is no such thing as a coterminous indicator.
All the following are lagging indicators except
A) labor cost per unit of output.
B) outstanding commercial loans.
C) corporate profits.
D) personal income.
D) personal income.
Explanation
Personal income is a coincident indicator. Corporate profits, labor cost per unit of output, and outstanding commercial loans are lagging indicators.
Several months of slow economic growth and rising unemployment have characterized the economy. Market analysts would describe this as a period of
A) inflation.
B) stagflation.
C) stagnation.
D) deflation.
C) stagnation.
Explanation
Stagnation is defined as prolonged periods of slow or little economic growth accompanied by high unemployment.
Increasing cost of goods and services and high unemployment are characteristics of
A) stagnation.
B) deflation.
C) inflation.
D) stagflation.
D) stagflation.
Explanation
Stagflation is the rare occurrence where the economy is contracting and income is dropping but prices are still rising.
Which of the following is a coincident indicator?
A) Household income
B) S&P 500 Index
C) Housing starts
D) Increase in the duration of unemployment
A) Household income
Explanation
Personal or household incomes are coincident indicators, moving up and down along with the overall economy. Equity prices and housing starts are both leading indicators. Changes in the duration of unemployment is a lagging indicator.
All the following are lagging indicators except
A) labor cost per unit of output.
B) corporate profits.
C) outstanding commercial loans.
D) personal income.
D) personal income.
Explanation
Personal income is a coincident indicator. Corporate profits, labor cost per unit of output, and outstanding commercial loans are lagging indicators.
An analyst is trying to determine upcoming economic activity to better determine her recommended investment strategy. She would be most interested in
A) coterminous indicators.
B) coincident indicators.
C) leading indicators.
D) lagging indicators.
C) leading indicators.
Explanation
When someone wants to know what future economic activity may be, she would be most interested in leading indicators. These indicators move in advance of economic activity. Coincident indicators move along with economic activity, and lagging indicators follow economic activity. There is no such thing as a coterminous indicator.
