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

Question

Quizplus · Accepted Answer

If deviations from trend in a macroeconomic variable are negatively correlated with deviations from trend in real GDP, it means that the variable tends to move in the opposite direction of real GDP. This indicates that the variable is countercyclical, which means it tends to fall during economic expansions and rise during economic downturns. This information is useful in predicting future movements in real GDP because the variable can provide insight into the direction of the business cycle.

If Deviations from Trend in a Macroeconomic Variable Are Negatively