NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
In the context of the business cycle, which group of indicators is best suited to signal a turning point in economic activity before it actually occurs?
Leading indicators are best suited to signal turning points in advance, because they change direction before the broader economy does. Coincident indicators move with the cycle and lagging indicators only confirm turns after they occur, so they are less useful for anticipating changes.
- ALagging indicators
- BCoincident indicators
- CLeading indicatorsCorrect
- DStructural indicators
Explanation
Leading indicators, such as new orders, stock market indices and building permits, change direction before the overall economy does. Coincident indicators move with the cycle and lagging indicators confirm a turn after it has happened, so neither can anticipate it.
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