Your Friend Notices That U

question 61

Multiple Choice

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

• A) is correct only when the economy is in a recession
• B) has mistakenly inferred causation from observed correlation
• C) has ignored secondary effects
• D) has committed the fallacy of composition
• E) is correct only when the United States enjoys economic growth

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Definitions:

Assets

Resources owned or controlled by a business, entity, or individual, with future economic value that can be measured and expressed in financial terms.

Externalities

Effects a project has on other parts of the firm or on the environment.

Cash Flow Estimation

The process of forecasting the cash inflows and outflows over a specific period, vital for budgeting and financial planning.

Cash Flows

The complete volume of financial transactions in and out of a business, crucially influencing its cash on hand.