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.
E) uncorrelated.

Question

Quizplus · Accepted Answer

A negative correlation between a macroeconomic variable and real GDP suggests that the variable moves in the opposite direction of the business cycle. This is known as countercyclical behavior, indicating that the variable tends to contract when the economy is expanding and vice versa. Thus, option C, countercyclical, is the best choice.

If Deviations from Trend in a Macroeconomic Variable Are Negatively