Question

Discuss the three types of indicators and their relationship to the business cycle.

Answer 1

On the basis of timing business cycle is divided into 3 parts

1)leading

2)lagging

3)coincident

Leading

these consist of those measures of economy whose shift predict the onset of business cycle. For example the average wage of a worker, average working hours etc.

Lagging

the Lagging consist of those measures which indicates the economic onset after it enters the period of fluctuations. For example, the consumer price index CPI , commercial lending activity.

Coincident

It consists of those measures that changes as business cycle progress. For example, Rate of unemployment, personal income etc.