CFA Level I · CFA Level I Exam · Understanding Business Cycles
Which of the following is most likely to be a lagging indicator of the business cycle?
The average duration of unemployment is the lagging indicator. It changes only after the economy has turned, whereas stock market returns and new orders for consumer goods typically move ahead of the cycle and are leading indicators.
- AAverage duration of unemploymentCorrect
- BStock market index returns
- CNew orders for consumer goods
Explanation
Unemployment duration is a lagging indicator because it changes after the economy turns. Stock prices and new orders tend to lead the cycle.
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