An economic variable that moves in the same direction as aggregate economic activity (up in expansions, down in contractions) is called A

Business Dec 23, 2020

An economic variable that moves in the same direction as aggregate economic activity (up in expansions, down in contractions) is called

A. a coincident variable.

B. transcendental.

C. procyclical.

D. countercyclical.

Expert Solution

The answer is C).

In business cycles, a variable could be pro-cyclical, counter-cyclical, or acyclical. A variable is pro-cyclical if it has a positive correlation with output, counter-cyclical if a negative correlation with output, and acyclical if no correlation with output. Therefore, a variable that moves in the same direction as aggregate economic activity is pro-cyclical.

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