Final answer:
A decline in the index of leading indicators may signal an impending recession, and this could be caused by events such as a stock market collapse, rising inflation, an increase in the natural rate of unemployment, and a rise in oil prices.
Step-by-step explanation:
The question pertains to economic indicators that signal the likelihood of a recession. Various changes can lead to a decline in the index of leading indicators, hinting at an economic downturn. These include:
- A stock market collapse, which affects consumer and business confidence negatively, leading to reduced spending and investment.
- Rising inflation, which erodes purchasing power and can decrease consumption and slow economic growth.
- A rise in the natural rate of unemployment, indicating more people are out of work involuntarily, hence a decrease in consumer spending power.
- A rise in oil prices, which can increase production and transportation costs, leading to higher overall prices and reduced consumer spending.
Extreme rapid growth of exports is generally positive and not associated with a decline in leading indicators. Changes in the financial market that could lead to a decline in interest rates include a rise in the supply of money.