The Income-Expenditure Identity Is Best Paraphrased as

question 2

Multiple Choice

The income-expenditure identity is best paraphrased as

• A) all spending generates income.
• B) all profits are used for investment spending.
• C) on average, consumers cannot save.
• D) on average, government can spend no more than what it collects in income taxes.

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Definitions:

Third-variable Problem

A scenario in research where an unmeasured variable causes or influences both variables of interest, potentially misleading interpretations of a correlation or relationship.

Causal Relationship

A connection between two events or states where one event is understood to be a direct result of the other.

Confounding Variable

An external variable that influences both the dependent and independent variables in a study, potentially skewing the results.

Observational Study

A study in which the researcher observes and records behavior or outcomes without manipulating variables.