1. A rise in planned inventories is a leading indicator of an expansion. True / False?...

1. A rise in planned inventories is a leading indicator of an expansion. True / False? Explain 40 word max

2. A rise in the unemployment rate is a concurrent indicator of a recession True / False? Explain 40 word max

3. Published data show that during the previous quarter (3 months) employment has risen that demand-pull inflation is rising. These indicators suggest that the growth of GDP is likely to increase in this or the next quarter. True / False? Explain 40 word max

4. A good leading indicator of changes in the rate of inflation during economic cycles is the change in the growth rate of the money supply. True / False? Explain 40 word max

5. The index of consumer sentiment is usually a leading indicator. True / False? Explain 40 word max

Solutions

Expert Solution

1. True

A rise in planned inventories is a leading indicator of an expansion as manufacturers expect a rise in demand in the future and thus have decided to increase their inventory levels to cater the same.

2. False

A rise in the unemployment rate is a good example of lagging indicator of a recession. A rise in unemployment rate implies that a lot of people have lost their jobs in the previous time period, which implies a recession in the previous time period. It is therefore a lagging indicator.

3. True

If the data from previous 3 quarteres shows that employment has rise and demand pull inflation has risen, it would mean that there has been a lot of production activity in the last three quarters which should reflect as higher output (GDP) in this quarter. It shows that the consumers are optimistic about the economy and are willing to spend more.

4. True

An increase in growth of money supply usually means that there would soon be more money in the hands of people. This would lead to higher spending by the people and thus lead to increased inflation. Therefore, it is a leading indicator.

5. True

The index of consumer sentiment is a measure of how optimistic or pessimistic the consumers are regarding the future of the economy. If they are confident that the economy will do well, they are expected to spend more and thus lead to increased GDP figures in the future. Similarly, if they are pessimistic about the future, they tend to spend less and thus lead to decreased GDP in the future. Therefore, it is usually a leading indicator.

Rahul Sunny answered 1 year ago

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