NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
In macroeconomic analysis, which of the following best describes a lagging indicator?
A lagging indicator changes only after the economy has already started following a trend, so it confirms rather than predicts. Examples include unemployment and bank credit. Leading indicators move before the cycle turns, while coincident indicators move along with it.
- AAn indicator that changes after the economy has already started following a particular trendCorrect
- BAn indicator that changes before the economy begins to follow a new trend
- CAn indicator that moves exactly in step with the business cycle
- DAn indicator that does not change over a business cycle
Explanation
Lagging indicators, such as unemployment rate or outstanding bank credit, turn only after the economy has already begun a new trend, so they confirm trends. Leading indicators turn before, and coincident indicators move together with the cycle.
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