List two leading indicators and two coincident indicators used to track business cycles.

• A. Leading: stock prices; new orders. Coincident: GDP; employment.
• B. Leading: unemployment rate; consumer confidence. Coincident: inflation; money supply.
• C. Leading: GDP; unemployment. Coincident: stock prices; interest rates.
• D. Leading: tax revenue; government spending. Coincident: budget balance; debt.

Answer: (A)

The main idea here is how to classify indicators that help track business cycles: leading indicators forecast where the economy is going, while coincident indicators move with the current level of economic activity.

Two leading indicators are stock prices and new orders. Stock prices reflect investors’ expectations about future growth and profitability, so they tend to change before the economy as a whole does. New orders signal upcoming demand for goods and services; a rise in orders suggests production will expand in the near future, and a fall hints at slowing activity ahead.

Two coincident indicators are GDP and employment. GDP measures current output and tends to move in line with the overall pace of the economy in the same period. Employment closely tracks economic activity at the same time because hiring responds to the current level of production and demand.

The other options mix indicators that aren’t reliably categorized as the chosen type. For example, unemployment is typically a lagging indicator, not leading, and measurements like money supply or inflation don’t fit the stated pairing as clean, contemporaneous indicators.