Canadian Securities Course (CSC) Level 1 Practice Exam

Give some examples of leading indicators.

1. Unemployment, inflation, labour costs

2. Stock prices, housing stats, manufacturers new orders

3. GDP, personal income, retail sales

4. Top of the cycle, demand begins to outstrip supply

The correct answer is: Stock prices, housing stats, manufacturers new orders

Leading indicators are economic indicators that change before the economy starts to follow a particular pattern or trend. In this case, stock prices, housing stats, and manufacturers' new orders are examples of leading indicators because they provide insights into the future direction of the economy. Stock prices can signal overall market sentiment and expectations for future company performance. Housing statistics such as new home sales and building permits can indicate the strength of the housing market, which is closely tied to consumer confidence and spending. Manufacturers' new orders can indicate upcoming production and investment trends, giving an indication of future economic activity. These indicators are used by analysts and policymakers to predict future economic conditions. Options A, C, and D do not represent leading indicators as they include lagging indicators like GDP, personal income, retail sales, and descriptions of economic cycles, which react to changes in the economy after they have occurred.