1. From table 1 find the leading indicators with the highest average score of all leading indicators.

Do similar thing for coincident and lagging indicators. Ans. a. Leading indicators Stock prices, 500 common stocks Ave= 81 b. Coincident indicators Employees in nonagri establishments Ave= 81 c. Lagging indicators Bus. Expend 2. Explain the difference between leading, lagging, and coincident indicators. Ans. Coincident indicators are economic indicators the measures the current economic performance while leading indicators measures the economic performance that will be used to forecast business conditions and Lagging indicators are whose fluctuations follows the trend in coincident indicators. 3. If you graph indicators from month to month, which type would tend to have the smoothest graphs- leading, coincident, or lagging indicators? Ans. Lagging indicators since the fluctuations in the graphs are not that extreme when viewed on a monthly basis 4. How do economists use the economic indicators described? Ans. They use the indicators as a basis for forecasting economic conditions as well as a basis in understanding the economic status which will be used a guide for investments and formulation of economic policies and policies. 5. If you had a new index of economic activity how would you decide whether it was a leading, lagging or coincident indicator, or whether it could not be classified as any of these? Im going to classify the said indicator according to the use of the said indicator in making decisions for forecasting/ identifying the economic condition. This will serve as a basis on further developing economic decisions and trends used for businesses. 6. Have the indicators been changed since this article was written? Yes, new indicators had been added nowadays such as interest rate spreads, price index 7. The wholesale price index(WPI) comes out each month. Suppose we compute a new index-call it the average recent wholesale price index (ARWPI)- by averaging the values of WPI for the 6 previous months (so for example, ARWPI for December =1/6[(WPI for Dec)+ (WPI for Nov)+ (WPI for Oct)+ (WPI for Sept)+ (WPI for Aug)+ (WPI for July)]

a. Will ARWPI be a lagging, leading or coincident indicator? Why? Ans. ARWPI will be a leading indicator because we can set a trend on the ARWPI to predict average over the next months based on the historical monthly WPI. b. Will ARWPI be smoother or less smooth than WPI? ARWPI will be smoother since extreme fluctuations of the WPI will be replaced by the averages in the indicators 8. a. if you wanted to know whether the business cycle was in a down phase or an up phase in early 1950s, would you rather see unemployment figures or stock prices for this year? Ans. Unemployment figure will be a good basis since it belongs to the coincident indicators which expresses the current economic condition of the said time. b. if you wanted to know in which months of the 1950s the business cycle changed directions would you rather see unemployment figures or stock prices? Ans. The stock prices will be a good basis since the said indicators dictates the trend on which the economy shifted.