SIE practice questionmediumLeading Economic Indicators
Which of the following is considered a LEADING economic indicator?
- AGross Domestic Product (GDP)
- BBuilding permits for new housing✓ Correct answer
- CConsumer Price Index (CPI)
- DAverage duration of unemployment
Explanation
Why B — Building permits for new housing
Building permits are a leading indicator because they predict future economic activity — permits are obtained before construction begins. Leading indicators change BEFORE the economy changes direction. GDP is a coincident indicator (measures current activity). CPI is a lagging indicator (reflects past price changes). Average duration of unemployment is a lagging indicator. Other leading indicators include stock market returns, initial jobless claims, and the money supply (M2).
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