Which statement correctly distinguishes leading indicators from coincident indicators in business-cycle analysis?

• A. Leading indicators predict future activity (stock prices, new orders); coincident indicators move with current activity (GDP, employment).
• B. Leading indicators lag current activity; coincident indicators lead.
• C. Both types move independently of the business cycle.
• D. There is no difference; they track the same data.

Answer: (A)

Leading indicators are metrics that tend to change before the overall economy does, giving people a glimpse of what’s coming. They help forecast the next moves in activity. Examples include stock prices and new orders for goods, which often shift before GDP or employment reflect those changes. Coincident indicators, on the other hand, move in step with the current level of economic activity. They mirror what’s happening right now in the economy, such as GDP and employment.

So the statement correctly captures that leading indicators forecast future activity while coincident indicators track the present state. The other ideas—leading indicators lagging, indicators moving independently of the cycle, or all indicators tracking the same data—don’t fit how these two types actually behave.