A spurious correlation refers to a situation where:
A. two variables are related through their correlation with a third variable.
B. the correlation coefficient between two variables cannot be estimated.
C. there is direct causal relationship between two variables but tests for correlations reject this relationship.
D. the correlation between two variables is positive till the sample size reaches a threshold, and negative after the sample size crosses the threshold.
Answer: A
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
Hedging risk for a short position is accomplished by
A) taking a long position. B) taking another short position. C) taking additional long and short positions in equal amounts. D) taking a neutral position.
The political business cycle refers to the possibility that:
a. incumbent politicians will be reelected regardless of the state of the economy. b. politicians will manipulate the economy to enhance their chances of being reelected. c. there are more recessions prior to elections. d. recessions coincide with election years.
The Phillips curve implies a positive relationship between inflation and unemployment.
a. true b. false