Question

Name and explain the 3 types of primary categories of Economic Indicators. Name and define two specific examples for each indicator; and suggest what there movements during the past year might suggest re. the direction of the economy

Answer 1

Economic indicator is the analysis of performance and predictions of future.

There are three types of primary categories of economic indicators. They are:

1. Leading indicator:

• Change before economic changes.
• Indicator of future changes.
• short term predictors.
• not always correct.
• an example is the stock market results.
• They decline when economy declines and recovers when economy recovers.
• another example is money supply, permits etc.

2. Lagging indicator:

• Change after economy changes.
• cannot be used to predict economic changes.
• example: unemployment rate which starts to increase after economy recovers.
• Another example is Bollinger bands used to measure high and low prices.

3. Coincident indicator:

• changes with economy.
• provides current state information of economy.
• Personal income is an example which grows along with the increase in strength of economy.
• Other examples are Gross national product which occurs after a specific economic activity, employment level etc.

In the direction of the economy:

1. procyclical indicators:

• same direction of general economy.
• Increase and decrease with the economy.
• example GDP.

2. Countercyclical indicators:

• different direction of general economy.
• ex: unemployment rate.
• inversly proportional to the changes in economy.

3. Acyclical Indicators:

• No relation with economy.
• rises or falls with changes in economy.

Hope this was helpful!