When Variable a Correlates Highly with B, Then

question 125

Multiple Choice

When variable A correlates highly with B, then

• A) A has caused B
• B) B has caused A
• C) variable B correlates highly with A
• D) none of these

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Definitions:

Disposable Income

Households' budget for spending and savings after the necessary income taxes have been deducted.

Induced Consumption

Consumer spending that increases as disposable income rises, and decreases as income falls.

Disposable Income

Net resources for spending and saving available to households after subtracting income taxes.

MPC

MPC, or Marginal Propensity to Consume, is the proportion of additional income that an individual spends on consumption.