CA Foundation · Business Economics · Business Cycles
Which of the following best describes how economists measure the turning points of business cycles using a composite approach?
Business cycle turning points are measured by combining several leading, coincident and lagging indicators into composite indices. Using many series captures broad-based movements in economic activity, whereas a single variable like the stock index, exchange rate or population growth would give an incomplete or misleading picture.
- ABy combining several leading, coincident and lagging indicators into indicesCorrect
- BBy observing only the movement of the stock market index
- CBy measuring only the rate of population growth
- DBy tracking only the exchange rate of the rupee
Explanation
Measurement of business cycles relies on composite indices built from many indicators classified as leading, coincident and lagging. A single series such as the stock index or exchange rate cannot capture the broad-based movement of activity. Population growth is a slow structural variable, not cyclical.
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