What Is an Advantage of the Correlation Coefficient Over the Covariance

question 109

Multiple Choice

What is an advantage of the correlation coefficient over the covariance?

• A) It falls between 0 and 1.
• B) It falls between -1 and 1.
• C) It is a unit-free measure, therefore making it easier to interpret.
• D) Both answers-that it falls between -1 and 1 and that it is a unit-free measure-are correct.

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Definitions:

Income

The financial gain or revenue received by an individual or entity, typically through wages, investments, or business operations.

Prices

The amount of money expected, required, or given in exchange for goods or services.

Marginal Rate

The rate of change in cost or benefit resulting from a particular increase in volume or activity.

Consumption

The use of goods and services by households, which is a primary component in calculating a country's gross domestic product (GDP).