SIE Exam Question 143: Answer and Explanation

Question: 143

Which of the following economic indicators would be classified as a leading indicator?

I. Stock market prices

II. Corporate profit and loss

III. Permits to build

IV. Changes in borrowing (businesses and consumers)

• A. I, II, III, and IV
• B. I only
• C. I, III, and IV
• D. I and II

Correct Answer: C

Explanation:

Stock market prices, permits for building, and changes in business and consumer borrowing are all considered to be leading economic indicators in that they each act as signals of an impending change to the economy and, accordingly, can be observed prior to the actual change. Corporate profits and losses are considered to be lagging economic indicators in that these types of effects are more observable after the change in the economy has already occurred.