Module 5
Which of the following is not currently a component of the index of leading economic indicators ?
Index of supplier deliveries - vendor performance diffusion index
Average weekly hours of production workers in manufacturing
Average weekly initial claims for state unemployment insurance
Manufacturers' new orders for consumer goods and materials
When Burns and Mitchell put together the first index of leading economic indicators, upon how many series was it based?
4
5
11
10
Suppose the employment cost index is decreasing while labor productivity is increasing. This means
The cost of producing a unit of output is inreasing
The cost of producing a unit of output is decreasing
That firms are not paying their working a market wage
That we can expect corporate profits to decrease in the near future
Since its trough shortly before the end of the 2008-2009 recession, ACE (average of consumer expectations)
Has largely remained negative
Has continued to decline
Has trended upwards consistently
Has turned positive and remained so
Some business-cycle and financial market analysts like to keep track of the ratio of the index of leading economic indicators to the index of lagging economic indicators. They do this because
The index of lagging indicators will still be increasing when the leading index starts to decline.
The index of lagging indicators will start decreasing before the leading indicator starts to decrease.
Both series tend to decline together and this will clearly show it.
Doing this will amplify the peaks and troughs of the lagging index.
Which of the following reasons for a change in wholesale sales would tend to make it a leading economic indicator?
Those that result from a change in government spending.
Those that result from an anticipated change in consumer spending.
Those that result from a need to replenish inventories.
Those that result from a decision to increase investment in plant and equipment.
Which of the following components of consumption declined during the 2001 recession?
Real expenditures on services
Real expenditures on Durable Goods
Real expenditures on NonDurable Goods
None of the above
Which of the following is not one of the three main components of consumer spending?
Housing
Services
Durable Goods
NonDurable Goods
Which of the following components of consumption trends to change the most (in real terms) during a business cycle?
Housing
Services
Durable Goods
NonDurable Goods
From the following list of series, pick out the one that is in the index of lagging economic indicators.
Manufacturers' new orders for consumer goods and materials
Average duration of unemployment
Index of supplier deliveries - vendor performance diffusion index
New private housing authorized by local building permits
In lecture 15 there was a diagram of the change from one year ago of the three main components of consumption expressed in real dollars. Which of the following statements about that diagram are true?
The change from one year ago in real services is a coincident indicator.
The change from one year ago in real services is a lagging indicator.
The change from one year ago of services, durable goods and nondurable goods are all leading economic indicators.
The change from one year ago of services and nondurable goods are coincident, but the change in durable goods is a leading economic indicator.
Suppose you are suspicious of numerical economic data and so you want to obtain anecdotal evidence on how businesses view economic conditions around the country. You can do this by
Reading the Beige Book
Looking at the ISM survey of purchasing managers
Talking to the sales' reps that visit your place of business
Watching a business network on television
How many consumers are surveyed each month by the Conference Board for their survey on consumer confidence?
500
750
1,000
5,000
Which of the following statements is false?
Average weekly initial claims for unemployment insurance peaked before the December 2007 business cycle peak.
Building permits peaked before the December 2007 business cycle peak
The S&P 500 peaked before the December 2007 business cycle peak.
Manufacturers' new orders, nondefense capital goods excluding aircraft orders expressed in real terms peaked before the December 2007 business cycle peak.
Which of the following statements about the index of leading economic indicators is not true?
Frequent revisions of the underlying series cause revisions of the index and this is a source of frustration to users of it.
It has produced a number of recession predictions over the years that have turned out to be false.
A sharp drop in the index of leading economic indicators occurred before every recession between 1965 and 2001.
The index has never been revised because one or more of its underlying series stopped being a leading economic indicator.
Which of the following is not a coincident economic indicator?
Employees on nonagricultural payrolls.
Personal income less transfer payments
Index of industrial production
The unemployment rate
In December 2011 the Conference Board announced it had revised the index of leading economic indicators. Which of the following series were not eliminated?
Index of consumer expectations of the University of Michigan
ISM's index of supplier deliveries or vendor performance diffusion index
The real M2 measure of the money stock
The average duration of unemployment
Which of the following pairs of components of the index of leading economic indicators represent labor market conditions?
Manufacturers' new orders for nondefense capital goods excluding aircraft and building permits
Average weekly hours, manufacturing and average weekly initial claims for unemployment insurance
The leading credit index and average weekly hours, manufacturing
Average weekly hours and average consumer expectation
Suppose the employment cost index is increasing faster than labor productivity. This means
The cost of producing a unit of output is increasing
The cost of producing a unit of output os decreasing
That firms are not paying their working a market wage
That we can expect corporate profits to increase in the near future
Looking at the change (from one year ago) in nominal retail and food service sales
Is misleading when the rate of inflation is low, but always positive
Can be misleading unless the rate of inflation is high and variable
We would see that is has been a leading indicator for recessions since the 1980 recession
We see that it is a coincident economic indicator
When putting together the index of leading economic indicators the Conference Board deflates nominal sales figures to make them real. With what prices index does it deflate Manufacturers' New Orders: nondefense capital goods excluding aircraft?
The producer price index for finished goods
The consumer price index
The gross domestic product implicit price deflator for capital goods
The producer price index for capital goods
From the following list of series, pick out the one that is in the index of coincident economic indicators
Average Prime interest rate
Real money supply measured by M2
Index of supplier deliveries-vendor performance diffusion index
Index of industrial production
How many consumers are surveyed each month by the University of Michigan for the Thomson Reuters/University of Michigan survey on consumer expectations?
500
750
1,000
5,000
During which of the following recessions did corporate profits after tax increase?
1973-75 recession
1981-82 recession
1990-91 recession
2008-2009 recession
Do retail sales tend to change more than overall consumer spending during a recession?
Yes, because overall consumer spending includes housing services which do not change very much during a recession.
No, because all consumer expenditures occur at the retail level.
Yes, because the only component of consumer spending that changes is spending on nondurable goods.
No, because the only component of consumer spending that changes is spending on nondurable goods.
Which of the following is not currently a component of the index of leading economic indicators?
Manufacturers' new orders, nondefense capital goods excluding aircraft
Average weekly initial claims for state unemployment insurance
The real money stock as measured by M2
Stock prices, 500 common stocks
From the following list of series, pick out the one that is in the index of lagging economic indicators.
Average Prime Interest rate
Real money supply measured by M2
Index of supplier deliveries-vendor performance diffusion index
New private housing authorized by local building permits
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