If the Correlation Between Variables a and B Is +0

question 26

Multiple Choice

If the correlation between variables A and B is +0.7, then

• A) we can use measurements of A to make moderately accurate predictions of the value of B.
• B) the mean value of B is greater than the mean value of A.
• C) the mean value of A is greater than the mean value of B.
• D) as variable A increases, variable B tends to decrease.

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Definitions:

Money Supply

At a specific instant, the total monetary assets within an economy, including coins, cash, and the amounts present in checking and savings accounts.

Nominal Interest Rate

The interest rate before adjustments for inflation, representing the face value of interest payments.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the true yield on savings.

Monetary Neutrality

The idea that changes in the money supply only affect nominal variables (like prices) in the long run and have no effect on real variables (like output or employment).