What is meant by the term "omitted variable" in correlation analysis? Explain with an example
What will be an ideal response?
An omitted variable is something that has been left out of a study which, if included, would explain why two variables are correlated. For example, it is seen that the rate of employees quitting is lower in firms that pay higher wages. Thus, a conclusion can be drawn that higher wages result in lower quit rates. But there are many other variables that might influence the quit rates apart from wages such as employee benefits provided by the firm, age of employees, work-life balance, etc. These variables that have been left out are omitted variables and if included in the study would better explain the quit rates of firms.
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What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the short-run aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?
What will be an ideal response?
Monetarists have maintained the Classical tradition by emphasizing the
A) importance of government's fine-tuning policies. B) inflationary impact of government spending. C) instability of money demand. D) inherent stability of the economy.
Which of the following would be classified as private investment?
a. An individual's purchase of a used car b. A family's purchase of groceries c. An individual's purchase of a General Electric bond d. A family's purchase of a newly built home e. A family's purchase of a new car
In order to predict changes in aggregate demand, it must be possible to forecast
A. changes in the demand for investment goods. B. changes in the demand for consumer goods. C. changes in the demand for money. D. All of the choices are correct.