Regarding Correlations,which of the Following Statements Is FALSE

question 45

Multiple Choice

Regarding correlations,which of the following statements is FALSE?

• A) It is impossible for two correlated variables to have a cause-and-effect relationship.
• B) We cannot conclude, solely on the basis of correlation, that a causal link exists.
• C) An experiment must be performed to establish a causal relationship.
• D) Often, two correlated measures are related as a result of the influence of a third variable.

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Definitions:

Risk Takers

Individuals or entities that are willing to take risks in pursuit of gain, often characterized by investments in ventures with uncertain outcomes.

Adverse Selection

A situation in which sellers have information that buyers do not, leading to transactions that favor the seller.

Insurance

A monetary service that offers coverage against possible future harms or losses in return for a premium payment.

Adverse Selection

Adverse selection is a situation in financial markets where there is asymmetric information leading buyers or sellers to make decisions that can result in the market becoming skewed or unbalanced, often seen in insurance markets.