Why Is It Unwise to Conclude That If Two Variables

question 168

Multiple Choice

Why is it unwise to conclude that if two variables are correlated, one must have caused the other?

• A) Variables can never be measured with complete accuracy.
• B) Any single variable is bound to have multiple causes.
• C) Some unmeasured third variable might make them appear related when in fact they are not.
• D) It is impossible to conclude that two variables are related unless one can measure them perfectly.

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Definitions:

Corporate Tax Rate

The proportion of a company's earnings that is remitted to the government in the form of taxes.

Demand Shock

An unexpected event that suddenly changes the demand for goods or services, potentially leading to swift changes in prices and economic adjustments.

Money Supply

The total amount of money available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Tax Rates

The percentage at which an individual or corporation is taxed.