Economic Indicators Flashcards

Which of the following would be included in U.S. GDP?

Answer: A Japanese firm's production in a factory located in Ohio

GDP measures output produced within a country's borders regardless of ownership, so a Japanese-owned factory in Ohio counts.

Core inflation differs from headline inflation in that core inflation excludes:

Answer: Volatile food and energy prices

Core inflation strips out food and energy because their prices are highly volatile and can obscure underlying inflation trends.

If the velocity of money increases while the money supply stays constant, the quantity theory of money (MV = PQ) predicts:

Answer: An increase in nominal GDP

Since MV = PQ (nominal GDP), holding M constant and increasing V must raise PQ, i.e., nominal GDP rises.

A nation has 150 million working-age adults; 100 million are employed and 10 million are unemployed. The unemployment rate is:

Answer: 9.1%

Unemployment rate = unemployed / labor force = 10 / (100 + 10) = 10/110 ≈ 9.1%.

Which business cycle phase is characterized by falling real GDP, rising unemployment, and declining consumer spending?

Answer: Recession

A recession is defined as a period of declining economic activity, typically two or more consecutive quarters of falling real GDP.

The index of leading economic indicators (LEI) is used primarily to:

Answer: Predict the future direction of the economy

The LEI aggregates variables like stock prices, building permits, and consumer expectations to forecast near-term economic trends.

Which of the following is an example of a coincident economic indicator?

Answer: Industrial production

Industrial production moves simultaneously with the overall economy, making it a coincident indicator.