Explain how the use of leading economic indicators to predict recessions can lead to less accurate policy decisions
The use of leading economic indicators to predict future trends can make policy decisions less accurate. For example, if the government responds with policies to combat the recession as soon as the leading economic indicators begin predicting one, then the recession that would have occurred may fail to materialize. On the other hand, a self-fulfilling prophecy may result if businesses respond with cutbacks in orders for plant and equipment as soon as the leading economic indicators begin predicting a recession.
You might also like to view...
In the circular flow model, which of the following owns the factors of production?
A) only federal, state, and local governments B) only households C) only firms D) both firms and households E) firms, households, and all levels of government
A bureaucrat at a public utility commission hearing testifies that the local area telephone monopoly is able to maximize its revenue. For that reason the rate-hike request should be denied
What will be an ideal response?