Someone Notices That Sunspot Activity Is High Just Prior to Recessions

question 162

Multiple Choice

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

• A) confused association and causation.
• B) misunderstood the ceteris paribus assumption.
• C) used normative economics to answer a positive question.
• D) built an untestable model.

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Definitions:

Short-Term Investments

Investments that are typically held for one year or less, intended for quick gains or temporary cash investment.

Sinking Funds

A type of savings account or fund that is set up to repay debt or an outstanding loan, making periodic payments into the fund for this purpose.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the products, and collect cash from the sales.

Maturity Value

The total amount payable to an investor at the end of a bond's term, including both the principal and the interest.