Chapter 13.5, Problem 1R

To determine

The importance of innovation, economic indicators, leading indicators, coincident indicators and lagging indicators.

Explanation of Solution

The significance of the various terms is as explained below:

1. Innovations: An invention when is transformed into a useful thing for humans is termed as innovation. Innovations can help in economic expansion and can help an economy to fight with situations like recession.

2. Economic indicators: The statistical figures which help measure the variables in an economy are economic indicators. These can be stock prices or the amount of loan to be repaid. These figures help analyze the economic situations in a nation.

3.Leading indicators: The statistical figures that exactly help analyze what can happen to an economy are leading indicators. Economists are concerned about these indicators as these indicators show a change in overall business activity.

4. Coincident indicators: Those economic indicators that change at the time when an overall business activity changes are coincident business indicators. These are also helpful for the economists as when there is a down trend in them, it is an indication that the contraction cycle has started.

5. Lagging indicators: The economic indicators that lag behind with the changes in overall business activities are lagging indicators. These are also helpful for economists as they provide a clue about the duration of the phases of business cycle.

Economics Concept Introduction

Introduction:

Business fluctuations- The up and down that an economy suffers due to business activities are termed as business fluctuations. The fluctuations in the business show the different phases which an economy is facing. So, business fluctuations can be used for analyzing and making strategic decisions.