CA Foundation · Business Economics · Business Cycles
Which of the following is a leading indicator that economists monitor to predict the onset of a recession in the upcoming quarters?
Leading indicators predict future economic activity. A decline in new orders received by manufacturers signals anticipated reduction in future production and sales, making it a reliable recession predictor that appears before actual GDP contraction.
- ACurrent unemployment rate and present consumer price levels
- BDecline in new orders received by manufacturing firmsCorrect
- CIncrease in retail sales volume in the current month
- DRising government expenditure and tax collections
Explanation
Leading indicators such as new orders for durable goods, consumer confidence indices, and credit conditions signal future economic direction before actual output changes. New orders decline ahead of reduced production. Current unemployment and retail sales are coincident or lagging indicators; government spending is a policy response variable, not a predictive signal.
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