Explain the difference between correlation and causation. Give an example of each.
What will be an ideal response?
Should show a thorough understanding of correlation and causation. Correlation is when two events occur together. However, this does not necessarily mean that one event caused the other. For example, a wolf could begin to howl just as a cloud covers the moon. The wolf howling did not cause the cloud to cover the moon. On the other hand, causation means one event brings about another event. These events may happen at the same time, but not necessarily. For example, there could be a fierce thunderstorm in the mountains. Ten hours after the storm, there is a landslide. The storm caused the landslide by loosening the soil. But the storm and the landslide did not happen at the same time.
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The theory of rational expectations, when applied to financial markets, is known as
A) monetarism. B) the efficient markets hypothesis. C) the theory of strict liability. D) the theory of impossibility.
In the United States, the strategy of monetary policy
a. has not changed even as the economic environment has varied. b. has been to target interest rates. c. has been to target the money supply. d. None of the above
Gains from trade can only occur when
A) marginal rates of substitutions differ across people. B) marginal rates of substitution are equal across people. C) indifference curves are convex. D) people find themselves on the contract curve.
Suppose the market for hot pretzels in New York City is perfectly competitive. What is true of demand in this market?
a. The demand curve facing each seller is perfectly elastic. b. The demand curve facing each seller is perfectly inelastic. c. The market demand curve is perfectly elastic. d. The market demand curve is perfectly inelastic. e. The market demand curve is elastic.