If deviations from trend in a macroeconomic variable are positively correlated with deviations from trend in real GDP,that variable is said to be
A) useful in predicting future movements in real GDP.
B) procyclical.
C) countercyclical.
D) acyclical.

Question

Quizplus · Accepted Answer

A variable that is positively correlated with real GDP deviations from trend would follow the business cycle and increase during an expansionary phase and decrease during a contractionary phase. This indicates procyclicality, and such a variable could be useful in predicting future movement in real GDP.

If Deviations from Trend in a Macroeconomic Variable Are Positively