8. a. Manufacturers’ new orders and nondefense capital goods are spending plans and will translate into actual production and expenditures some time later. Thus they become good forecasts of economic activity.
b. The index of industrial production reflects the actual economic activity at the time it is reported.
c. The prime rate reflects changes in the demand and supply of loanable funds. Only when such changes are experienced by banks, will they change the rate. They may wait until they are certain that the change is not a temporary event, but will have some permanency.