Y = 69 + 0.002 X where: Y = toy industry sales in (in 100 of millions) X = GDP (in Billions) Statement “Both the dependent and the independent variables should be adjusted for inflation to prevent spurious correlation that could significantly affect the results.” Is the statement correct with regard to adjust both variables for inflation? Dependent Variable Independent Variable A. Yes Yes B. Yes No C. No Yes D. No No *****ANSWER******* The answer to this is A but I don’t understand why because I’m thinking that when you adjust the independent variable, the dependent one will automatically reflect inflation as well. Is it it the wording that I got wrong or is my concept wrong? Thanks
but then you’ve have correlation w/o causality - you’ll have situations where toy sales and GDP have both gone up, but only because of inflation effects. If you don’t adjust both sides, you’ll get accidental correlations, just like the january snow fall in minnesota example in schweser. GL