CFA Level I · CFA Level I Exam · Understanding Business Cycles
Which of the following best describes a leading economic indicator?
A leading indicator is a series that typically turns before the economy's turning points. Because it changes direction ahead of overall activity, analysts use it to anticipate peaks and troughs. Coincident indicators move with the cycle and lagging indicators turn after it.
- AA series that peaks and troughs after the economy does
- BA series that typically turns before the economy's turning pointsCorrect
- CA series that moves in step with current economic activity
Explanation
Leading indicators typically change direction before the economy does, so they help anticipate peaks and troughs. Coincident indicators move with the economy, and lagging indicators turn after it.
Did you get it right without looking?
One question tells you little. A timed set on Understanding Business Cycles shows your real accuracy, how long you take and where you lose marks.
More Understanding Business Cycles questions
- Which feature most accurately distinguishes the contraction phase of the business cycle from the expansion phase?
- During the early phase of an economic expansion, firms most likely respond to rising demand by:
- An economy is in the trough of a recession and shows early signs of recovery. Compared with the preceding contraction, which combination of …
- Which of the following is most likely to be a lagging indicator of the business cycle?
- An analyst observes that a widely used leading indicator index has declined for several months, yet the economy then avoids a recession. Thi…
- A composite leading index has declined for several consecutive months, but coincident indicators remain strong and employment is still growi…