An economic analyst is tracking how macroeconomic indicators respond around a business cycle peak. Arrange the following economic metrics in chronological order based on when they typically reach their peak turning point, starting with the metric that turns earliest (before the peak) and ending with the metric that turns latest (after the peak).
- 1Average weekly initial claims for unemployment insurance
- 2Industrial Production Index
- 3Prime rate charged by major commercial banks
- 4Average duration of unemployment
Answer
The correct chronological sequence of economic indicator turning points from earliest to latest is: Average weekly initial claims for unemployment insurance (Leading), Industrial Production Index (Coincident), Prime rate charged by major commercial banks (Lagging), and Average duration of unemployment (Lagging).
The correct order follows the standard indicator timeline relative to a business cycle peak. Leading indicators (such as initial unemployment claims) reach their turning point first as business expectations change. Coincident indicators (such as the Industrial Production Index) peak simultaneously with broad economic activity. Lagging indicators reach their turning point after the economy has already turned; among lagging indicators, interest rate benchmarks like the prime rate adjust as credit markets react, while structural metrics like the average duration of unemployment turn latest due to persistent labor displacement.
Step-by-Step Solution
Key Concept
Chronological turning-point sequencing of leading, coincident, and lagging economic indicators relative to business cycle phases.