A leading indicator:
A) changes in either direction before a recession starts.
B) usually declines before a recession starts.
C) generally changes after real GDP changes.
D) remains unaffected by changes in real GDP.
E) does not change with business cycles.

Question

Quizplus · Accepted Answer

Leading indicators are economic factors that change before the economy starts to follow a particular pattern or trend. They are used to predict changes in the economy. Option B is correct because leading indicators, such as stock market returns, new orders for durable goods, and unemployment claims, typically decline before a recession starts, signaling the downturn in advance.

A Leading Indicator