Suppose the Index of Leading Economic Indicators Begin to Decline

question 16

Multiple Choice

Suppose the index of leading economic indicators begin to decline for several months. Which of the following economic events will likely follow?

• A) A recession.
• B) Severe inflation.
• C) Greater employment.
• D) Higher investment.

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Definitions:

Expansionary Gap

A situation where the actual level of output in an economy exceeds its potential output, often leading to inflation.

Active Approach

An active approach in policy-making or investment strategy entails ongoing, deliberate interventions or decisions to achieve specific economic or financial goals.

Potential Output

The maximum level of real GDP that can be produced when all resources are fully employed in an economy, indicating its productive capacity.

Real GDP

The total value of all goods and services produced within a country, adjusted for inflation, providing a more accurate measure of economic performance.