SIE practice questionmediumLagging Indicators
Which of the following is a LAGGING economic indicator?
- AAverage prime rate charged by banks✓ Correct answer
- BInitial claims for unemployment insurance
- CBuilding permits
- DS&P 500 stock index
Explanation
Why A — Average prime rate charged by banks
The average prime rate is a lagging indicator — banks adjust their prime rate AFTER the economy has already changed direction. Other lagging indicators include the average duration of unemployment, the CPI, outstanding commercial and industrial loans, and the ratio of consumer credit to personal income. Initial jobless claims (A), the stock market (B), and building permits (D) are all leading indicators that change before the economy does.
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