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

The Conference Board's Leading Economic Index (LEI) aggregates ten forward-looking indicators specifically designed to predict near-term economic direction.

Question 2

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

Accepted Answer

Expansion in the manufacturing sector

Answer

A PMI above 50 signals that more purchasing managers reported improving than deteriorating conditions, indicating sector expansion.

Question 3

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

Accepted Answer

Average prime lending rate charged by banks

Answer

The average prime lending rate is a lagging indicator because banks typically adjust rates after economic conditions have already changed.

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

The CPI tracks price changes experienced by urban consumers for a fixed basket of goods and services, serving as the primary measure of consumer-level inflation.

Question 5

The yield curve is described as 'inverted' when:

Accepted Answer

Short-term interest rates exceed long-term interest rates

Answer

An inverted yield curve occurs when short-term yields are higher than long-term yields, which has historically been a reliable recession predictor.

(CBE) Certified Business Economist Practice Test

(CBE) Certified Business Economist Practice Test

CBE Business Cycles and Economic Indicators 2