Match each specified economic metric to its correct business cycle classification and functional role in macroeconomic analysis.
- Building Permits for New Private Housing UnitsLeading Indicator — Anticipates future economic expansion by reflecting early commitments of capital, labor, and materials.
- Industrial Production IndexCoincident Indicator — Measures real aggregate physical output and economic performance simultaneously as the business cycle turns.
- Average Prime Rate Charged by BanksLagging Indicator — Reflects commercial interest rate adjustments made by financial institutions after broad economic shifts have occurred.
- Ratio of Consumer Installment Credit to Personal IncomeLagging Indicator — Measures cumulative household debt burden relative to income after consumer spending trends have fully materialized.
Answer
Building Permits for New Private Housing Units matches Leading Indicator (anticipates future expansion); Industrial Production Index matches Coincident Indicator (measures real output simultaneously); Average Prime Rate Charged by Banks matches Lagging Indicator (commercial interest rate adjustments post-shift); Ratio of Consumer Installment Credit to Personal Income matches Lagging Indicator (cumulative debt relative to income post-spending).
Building permits predict future economic activity (leading), industrial production reflects current physical output (coincident), while bank prime rates and consumer credit ratios confirm economic shifts after they occur (lagging).
Step-by-Step Solution
Key Concept
Categorization of Leading, Coincident, and Lagging Economic Indicators