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
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.
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