The Illusory Correlation Effect Occurs When We

question 234

Multiple Choice

The illusory correlation effect occurs when we

• A)incorrectly assume that one social trait is the cause of another, simply because we have observed that they are correlated.
• B)are motivated to accurately estimate the frequency with which some pattern of social traits occurs.
• C)see correlations between social traits that really aren't there, because our expectations distort our memories.
• D)fail to see true correlations between social traits, because our expectations distort our memories.

---

Definitions:

Solvency Measure

Financial metrics used to assess a company's ability to meet its long-term obligations and its financial stability.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash in the short term.

Long-Term Liabilities

Financial obligations of a company not due for more than one year, including bonds payable, long-term leases, and pension obligations.

Times Interest Earned

A ratio that measures creditor margin of safety for interest payments, calculated as income before interest and taxes divided by interest expense.