Alfonso Has Noticed That Increases in Unemployment Insurance Claims Are

question 40

Multiple Choice

Alfonso has noticed that increases in unemployment insurance claims are associated with recessions,and therefore he advocates limits on unemployment insurance so as to prevent recessions.Mary has noticed that most drug addicts once attended schools,and therefore she advocates getting rid of schools so as to prevent drug addiction.

• A)The reasoning of both Alfonso and Mary suffers from the omitted variable problem.
• B)The reasoning of both Alfonso and Mary suffers from the reverse causality problem.
• C)Alfonso's reasoning suffers from the reverse causality problem,and Mary's reasoning suffers from the omitted variable problem.
• D)Mary's reasoning suffers from the reverse causality problem,and Alfonso's reasoning suffers from the omitted variable problem.

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Definitions:

Government Expenditures

The total amount spent by the government for its operations, public services, and social welfare programs.

Aggregate Spending

The total spending on goods and services in an economy at a given overall price level and in a given time period.

Marginal Propensity

The ratio of change in an economic variable, such as consumption or saving, to a change in another, like income.

Consumption Spending

The total amount of money spent by households and consumers on durable goods, nondurable goods, and services.