2006 Exam Q

Q12 - Economic Indicators Are both unemployment and retail sales leading economic indicators, and that’s why declines in both lead to straight up no-brainer effect on U.S. bonds and S&P500 Index? I was thinking unemployment was a lagging indicator b/c economy must tank first before people get laid off. But I guess I’m wrong since Avg weekly initial claims for unemployment insurance is listed on the Leading Index. What is retail sales? I don’t see it on any of the three.

bmp. does anyone have insight on this or even an opinion?

I think increase in retail sales is due to increase in consumer confidence in the economy. Consumer spending accounts for 70% of GDP. Higher retail sales may mean good things to come in the future

I dont think it has anything to do with indicators … You have to look at the effects on other factors … example : Unemployment leads to …lower spending - lower demand- lower inflation - lower interest rates which is good for bonds . In the same way : Unemployment leads to …lower spending - lower demand- lower corporate profits - lower stock prices - overall lower S&P 500 index ( like the current economy )

that makes sense. I just thought that approach seemed too simple to be tested for an entire problem set at L3 (and the answer key did reference reading on Econ Indicators). so i guess unless we’re asked specifically about indicators… For example, a lagging indicator would have a very different impact on U.S. bonds than a leading indicator.

I highly doubt they will ask us about a specific indicator …and if they do it wont be worth much mayb 2–3 points . just my .02 Also indicators dont affect anything directly …they just shed light on where the economy might be heading , where it is and where its been recently .

Rudeboi Wrote: ------------------------------------------------------- > Also indicators > dont affect anything directly …they just shed > light on where the economy might be heading , > where it is and where its been recently . Good point. The question did say what is the ‘impact’ of increasing/decreasing unemployment/retail sales on… so Thanks.