Final answer:
Leading indicators are used to predict future phases of the business cycle before changes are evident in the economy, making A. True the correct answer.
Step-by-step explanation:
Leading indicators are indeed key economic variables that economists use to forecast future phases of a business cycle.
An example of a leading indicator is new orders for consumer durables, which signal how the economy might behave in the future.
Leading indicators attempt to predict the direction of the economy before changes become apparent in the overall economic activity.
Coincident indicators, such as gross domestic product (GDP), measure current economic activities.
Meanwhile, lagging indicators, like interest rates, become clear only after the economic activity has occurred.
These indicators help in crafting governmental economic policy, with the goal to mitigate the destructive aspects of the business cycle and provide clues for future economic outlooks.
As recognition lags are an issue due to the time taken to collect and revise economic data, leading indicators help to reduce such lags, assisting economists and policymakers to react more promptly to economic changes.
As a result, the correct answer to the student's question is A. True.