CBE Business Cycles and Economic Indicators 2

Question 1

Which composite index published by The Conference Board is most widely used to forecast future economic activity over the next 3–6 months?

Accepted Answer

Leading Economic Index (LEI)

Answer

Consumer Confidence Index

Answer

Producer Price Index (PPI)

Answer

Purchasing Managers' Index (PMI)

Question 2

A Purchasing Managers' Index (PMI) reading above 50 indicates:

Accepted Answer

Expansion in the manufacturing sector

Answer

Economic contraction in the manufacturing sector

Answer

Stable, unchanged economic conditions

Answer

A decrease in new business investment

Question 3

Which of the following is classified as a lagging economic indicator?

Accepted Answer

Average prime lending rate charged by banks

Answer

Stock market returns

Answer

Building permits issued

Answer

Manufacturers' new orders for capital goods

Question 4

The Consumer Price Index (CPI) is best described as a measure of:

Accepted Answer

Changes in prices paid by urban consumers for a representative basket of goods and services

Answer

Changes in prices of goods produced domestically at the factory gate

Answer

Changes in wholesale prices before retail markup is applied

Answer

The purchasing power of the U.S. dollar relative to a basket of foreign currencies

Question 5

The yield curve is described as 'inverted' when:

Accepted Answer

Short-term interest rates exceed long-term interest rates

Answer

Long-term interest rates exceed short-term interest rates by a wide margin

Answer

All maturities have identical interest rates

Answer

The Federal Reserve raises the federal funds target rate

Question 6

Which statement best describes 'coincident indicators' in economic analysis?

Accepted Answer

Indicators that move in tandem with the overall economy in real time

Answer

Indicators that change before the economy changes direction

Answer

Indicators that change after the economy has already shifted direction

Answer

Indicators that measure expectations and forward-looking inflation

Question 7

Real GDP differs from nominal GDP primarily because real GDP:

Accepted Answer

Is adjusted for changes in the price level (inflation or deflation)

Answer

Excludes government spending and transfer payments

Answer

Measures only final goods and services produced for export

Answer

Includes only goods and services produced within national borders