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Question 1
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
45%
(medium)
Question Stats:
56% (02:52) correct
44%
(03:04) wrong
based on 2499
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
65%
(hard)
Question Stats:
49% (01:22) correct 51%
(01:19) wrong
based on 2470
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
73% (00:59) correct 27%
(01:09) wrong
based on 2300
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
45%
(medium)
Question Stats:
57% (01:02) correct 43%
(01:11) wrong
based on 2333
sessions
History
Date
Time
Result
Not Attempted Yet
American economists continually attempt to gauge the health of the economy, both for the gain of the private sector as well as for the global standing of the United States. Different elements of the economy react differently to changes in prosperity. Some elements rise and fall as the economy waxes and wanes. These are known as coincident indicators. Other elements are known as leading indicators and usually show a downturn before the economy does. A third group of elements are known as lagging indicators and lose vigor only after the economy has already begun to slow. Economists can predict the direction of the economy by monitoring these indicators.
Coincident indicators, such as manufacturing and employment rates, are the best gauge of the current state of the economy. A continued shift in these indicators allows economists to determine whether the economy itself is in the process of an upturn or a downturn. These indicators coincide with shifts in the economy because they are dependent on sustained prosperity. But since coincident indicators reflect only the current state of the economy, they are not especially useful in predicting how the economy will perform in the near future. Economists must look to other indicators for that.
The indicators with the greatest predictive power are leading indicators, such as mortgage applications and profit margins. When these indicators rise or fall, economists can often foretell similar changes in the country’s economic health. These indicators do not cause changes in the economy. Rather, they often signal changes in economic behavior that lead to shifts in the economic cycle. By contrast, the third type of indicator – lagging indicators – is useless as a harbinger of change. But these indicators can be helpful in confirming the assessments of economists.
Determining which elements of the economy fall into which category of indicator requires analysis of copious data and an understanding of the factors that propel the economy. One must determine which events surrounding a turn in the business cycle actually contributed to the change. Establishing a solid framework for understanding the behavior of these indicators helps economists to avoid miscalculations and to guide the country through periods of slow or negative economic growth.
Coincident indicators, such as manufacturing and employment rates, are the best gauge of the current state of the economy. A continued shift in these indicators allows economists to determine whether the economy itself is in the process of an upturn or a downturn. These indicators coincide with shifts in the economy because they are dependent on sustained prosperity. But since coincident indicators reflect only the current state of the economy, they are not especially useful in predicting how the economy will perform in the near future. Economists must look to other indicators for that.
The indicators with the greatest predictive power are leading indicators, such as mortgage applications and profit margins. When these indicators rise or fall, economists can often foretell similar changes in the country’s economic health. These indicators do not cause changes in the economy. Rather, they often signal changes in economic behavior that lead to shifts in the economic cycle. By contrast, the third type of indicator – lagging indicators – is useless as a harbinger of change. But these indicators can be helpful in confirming the assessments of economists.
Determining which elements of the economy fall into which category of indicator requires analysis of copious data and an understanding of the factors that propel the economy. One must determine which events surrounding a turn in the business cycle actually contributed to the change. Establishing a solid framework for understanding the behavior of these indicators helps economists to avoid miscalculations and to guide the country through periods of slow or negative economic growth.
1. The primary purpose of the passage is to
A. compare the utility of various economic indicators
B. explain the process by which economists draw conclusions about key factors of economic change
C. present a conceptual framework used by economists to prescribe economic goals
D· trace the development of a set of economic devices
E. argue for the continued evaluation of economic factors affecting the business cycle
A. compare the utility of various economic indicators
B. explain the process by which economists draw conclusions about key factors of economic change
C. present a conceptual framework used by economists to prescribe economic goals
D· trace the development of a set of economic devices
E. argue for the continued evaluation of economic factors affecting the business cycle
2. The information in the passage suggests that which of the following would most strongly indicate an imminent change in the business cycle?
A. a decrease in the employment rate
B. a decrease in the number of new homes built per month
C. an increase in the number of new automobiles produced each month
D. an increase in the difference between manufacturing costs and retail revenues for large home appliances
E. a decrease in the number of corporate bankruptcies per month
A. a decrease in the employment rate
B. a decrease in the number of new homes built per month
C. an increase in the number of new automobiles produced each month
D. an increase in the difference between manufacturing costs and retail revenues for large home appliances
E. a decrease in the number of corporate bankruptcies per month
3. According to the passage, the main purpose of economic indicators is which of the following?
A. to facilitate the analysis necessary to maintain forward economic momentum
B. to allow investors to time their investments in sync with economic cycles
C. to foster healthy economic competition among various commercial sectors
D. to bring to light several key factors in economic downturns
E. to promote widespread understanding of economic principles
A. to facilitate the analysis necessary to maintain forward economic momentum
B. to allow investors to time their investments in sync with economic cycles
C. to foster healthy economic competition among various commercial sectors
D. to bring to light several key factors in economic downturns
E. to promote widespread understanding of economic principles
4. The passage suggests that lagging indicators would be least helpful in determining which of the following?
A. whether predictions based on the behavior of the mortgage market were accurate
B. whether companies ought to cut costs in order to avoid short-term losses
C. whether recent trends in the employment rate were consistent with the overall economic picture
D. whether financial analysts are correct in their assessment of recent economic developments
E. whether the government was justified in taking action to boost the economy
A. whether predictions based on the behavior of the mortgage market were accurate
B. whether companies ought to cut costs in order to avoid short-term losses
C. whether recent trends in the employment rate were consistent with the overall economic picture
D. whether financial analysts are correct in their assessment of recent economic developments
E. whether the government was justified in taking action to boost the economy
Manhattan CAT 5
06 Jun 2013, 05:35
Kudos
Bookmarks
Official Explanations:
1. The primary purpose of the passage is to
A. compare the utility of various economic indicators
B. explain the process by which economists draw conclusions about key factors of economic change
C. present a conceptual framework used by economists to prescribe economic goals
D· trace the development of a set of economic devices
E. argue for the continued evaluation of economic factors affecting the business cycle
Questions that ask about "primary purpose" must take into account the passage in its entirety. Overall, this passage is about the differing predictive uses of the various economic indicators.
(A) CORRECT. The passage does indeed focus on the utility of "various economic indicators."
(B) This choice mistakenly focuses on a process that is not discussed in the passage.
(C) This choice focuses only on a few sentences in the last paragraph of the passage.
(D) This choice mischaracterizes the intent of the passage in using the verb "trace", which implies a chronology.
(E) This choice is incorrect in describing the author's purpose with the verb "to argue." The author does not present an argument in the passage, but rather an objective comparison.
2. The information in the passage suggests that which of the following would most strongly indicate an imminent change in the business cycle?
A. a decrease in the employment rate
B. a decrease in the number of new homes built per month
C. an increase in the number of new automobiles produced each month
D. an increase in the difference between manufacturing costs and retail revenues for large home appliances
E. a decrease in the number of corporate bankruptcies per month
The third paragraph states that mortgage applications and profit margins are examples of leading indicators, which have the greatest predictive power. Therefore, we need to find an answer choice that relates to either mortgage applications or profit margins.
(A) This choice focuses on the employment rate, which is a coincident indicator (paragraph 2).
(B) This choice focuses on the number of new homes being built, which is not discussed in the passage. Do not assume that the number of new homes being built can be correlated with mortgage applications, which are indeed a leading indicator (paragraph 3).
(C) This choice focuses on manufacturing, which is a coincident indicator (paragraph 2).
(D) CORRECT. Imminent changes in the economic cycle are indicated by leading indicators, of which profit margins are an example (paragraph 3). The increase described in this choice is indeed a profit margin (revenue minus cost).
(E) This choice focuses on bankruptcies, which are not mentioned in the passage.
3. According to the passage, the main purpose of economic indicators is which of the following?
A. to facilitate the analysis necessary to maintain forward economic momentum
B. to allow investors to time their investments in sync with economic cycles
C. to foster healthy economic competition among various commercial sectors
D. to bring to light several key factors in economic downturns
E. to promote widespread understanding of economic principles
In the last paragraph, the author writes: "Establishing a solid framework for understanding the behavior of these indicators helps economists to avoid miscalculations and to guide the country through periods of slow or negative economic growth."
(A) CORRECT. This choice is consistent with the information contained in the last paragraph.
(B) This choice focuses only on a subpart of this analysis: the role of the indicators for the private investor.
(C) This choice is not reflected in the passage.
(D) This choice focuses only on downturns whereas the indicators are used for either upward or downward economic change.
(E) This choice is not reflected in the passage.
4. The passage suggests that lagging indicators would be least helpful in determining which of the following?
A. whether predictions based on the behavior of the mortgage market were accurate
B. whether companies ought to cut costs in order to avoid short-term losses
C. whether recent trends in the employment rate were consistent with the overall economic picture
D. whether financial analysts are correct in their assessment of recent economic developments
E. whether the government was justified in taking action to boost the economy
Lagging indicators have no predictive power. They serve simply as confirmation of the recent state of the economy. Therefore, lagging indicators would not be helpful in determining future courses of action.
(A) This does not require predictive power.
(B) CORRECT. This choice – cutting costs to avoid short-term losses – requires predictive power. And so lagging indicators would not be helpful in determining whether companies should follow this course of action.
(C) This does not require predictive power.
(D) This does not require predictive power.
(E) This does not require predictive power.
General Discussion
24 Nov 2025, 05:13
Kudos
Bookmarks
In Q1 author is not comparing these indicators he is just presenting their use and their terminology. And Option 1 in the Q1 says 'comparing' how is it right then?
carcass
