Final answer:
The false statements are that manufacturing orders are not a good forecaster of output and that a PMI greater than 50 indicates contraction in manufacturing. Manufacturing orders can forecast output, and a PMI over 50 actually indicates expansion.
Step-by-step explanation:
The statement that consumption accounts for most of economic activity is generally true as it drives a significant portion of the Gross Domestic Product (GDP). However, the statement that manufacturing orders have a shorter lead time and are not a good forecaster of output is incorrect. In fact, manufacturing orders can be a leading indicator of economic activity as manufacturers adjust orders based on expected demand. Regarding the third statement, it is false that a PMI (Purchasing Managers' Index) greater than 50 indicates a contraction in manufacturing. A PMI over 50 actually signifies expansion in the manufacturing sector, whereas a PMI below 50 indicates contraction.
A recession is defined as a period when Real GDP decreases for 6 consecutive months and the unemployment rate usually increases. Moreover, unemployment has a lagging response to changes in economic activity, meaning firms take time to lay off or hire workers in response to shifts in demand.