If deviations from trend in a macroeconomic variable are negatively correlated with deviations from trend in real GDP,that variable is said to be
A) useless in predicting future movements in real GDP.
B) procyclical.
C) countercyclical.
D) acyclical.
E) uncorrelated.

Question

Quizplus · Accepted Answer

If a variable is negatively correlated with deviations from trend in real GDP, it moves in the opposite direction of real GDP. In other words, it is countercyclical. Therefore, option C is the correct answer. Option A, D and E can be ruled out as they either suggest the variable has no correlation or cannot indicate its direction of movement. Option B suggests it is moving in the same direction as real GDP, which contradicts the given information.

If Deviations from Trend in a Macroeconomic Variable Are Negatively