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Chapter 12: Problem 5

One leading indicator is average weekly hours worked. If this indicator rises, what does it indicate about the future performance of the economy? Explain your answer.

Short Answer

Expert verified
When the average weekly hours worked increase, this indicates that demand is higher and employers are utilizing their existing workforce more. Thus, it suggests a likely future economic growth.

Step by step solution

01

Understand the Concept of Leading Indicator

A leading indicator is a measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but they are not always accurate. The average weekly hours worked is an example of a leading indicator.
02

Implications of Rising Weekly Hours Worked

When average weekly hours worked by workers in an economy increases, it indicates that employers are utilizing their existing workforce more which could be a result of higher demand. This is typically associated with a growth phase of the business cycle indicating possible economic growth in the future.
03

Conclusion

So, an increase in the leading indicator of average weekly hours worked is likely to be a positive sign for future economic performance, as it indicates a probable increase in production, as businesses respond to higher demand.

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