Question

For each of the following variables, indicate whether it is pro, counter, or a- cyclical and...

For each of the following variables, indicate whether it is pro, counter, or a- cyclical and whether it is leading, lagging, or coincident with GDP. (1) Inventories (2) Average labor productivity (3) Stock Prices (4) Consumption (5) Inflation

Homework Answers

Answer #1

The variables which are positively co-related with the economy are called pro-cyclical and negatively co-related are called counter cyclical.

1)Inventories are pro-cyclical , leading indicator as the demand for inventory is expected to increase

2)Average labour productivity is pro cyclic , lagging indicator

3)Stock prices are pro cyclic , leading indicator.

4)consumption is also pro cyclic , leading indicator.

5)Inflation is pro cyclical as it increases during booms and falls during crisis , it is also a lagging indicator.

I hope that this helps .If you have any queries ,put it in the comments.I will edit/modify my answer according to your needs.

Have a nice day :)

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