SIE cheat sheetSection 1: Knowledge of Capital Markets (16%)
Economic Indicators
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Leading Indicators (predict FUTURE economic activity)
- Building permits
- Stock market prices (S&P 500)
- Money supply (M2)
- Average weekly hours (manufacturing)
- New orders for consumer goods
- Initial unemployment claims (inverse — fewer claims = growth coming)
Coincident Indicators (show CURRENT economic activity)
- GDP (Gross Domestic Product)
- Personal income
- Industrial production
- Nonfarm payrolls
- Manufacturing and trade sales
Lagging Indicators (confirm PAST trends)
- Unemployment rate (average duration)
- CPI (Consumer Price Index) — measures inflation
- Prime rate / interest rates
- Outstanding commercial & industrial loans
- Ratio of consumer installment credit to income
Key Measures
- GDP: Total value of all goods and services produced
- CPI: Measures inflation — basket of consumer goods prices
- PPI: Producer Price Index — wholesale price changes
- Unemployment rate: % of labor force without a job
- Federal funds rate: Rate banks charge each other for overnight loans
Key facts to memorize
- Stock prices = leading indicator
- GDP = coincident indicator
- CPI = lagging indicator
- Unemployment claims (initial) = leading; unemployment rate = lagging
- CPI measures consumer inflation; PPI measures wholesale/producer inflation
Mnemonics that stick
- "LEADING = Looking ahead" — building permits, stock prices, money supply predict the future
- "LAGGING = Looking back" — unemployment duration, CPI, prime rate confirm what already happened
- "CPI = Consumer Prices & Inflation"
- "GDP = Good Domestic Production" — everything produced in the country
Exam traps
- The STOCK MARKET is a LEADING indicator, not coincident — it predicts future activity
- CPI is a LAGGING indicator — it confirms past inflation, doesn't predict it
- GDP is a COINCIDENT indicator — it measures current output, not future
- Unemployment CLAIMS (initial) are leading, but UNEMPLOYMENT RATE is lagging
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