What Does Simpson's Paradox Teach Us

question 13

Multiple Choice

What does Simpson's Paradox teach us?

• A)The nature of an association can reverse direction when data from several groups are combined to form a single group.
• B)Omitting a third variable can mask the true relationship between two categorical variables.
• C)It is dangerous to summarize information over groups, especially if the individuals were not randomly assigned to those groups.
• D)All of the above.

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Definitions:

Annual Depreciation

The gradual reduction in the recorded value of a fixed asset, representing its wear and tear, obsolescence, or other declines in value over time.

Book Value

The net value of a company's assets, as recorded on the balance sheet, minus its liabilities and intangible assets.

Financial Statements

Documents that present the financial activities and conditions of a business or entity, including the balance sheet, income statement, and cash flow statement.

Basic Assumptions

Fundamental accounting principles that underpin the preparation and presentation of financial statements.