Analyzing Economic Relationships
An economic study reveals a consistent positive association between the size of a country's stock market (as a percentage of its economy) and its average citizen's standard of living. A politician uses this study to argue, 'To make our citizens wealthier, we simply need to pass laws that encourage more companies to list on the stock exchange.' Explain the primary logical flaw in the politician's argument and propose one alternative explanation for the observed association that does not involve the stock market's size causing the higher standard of living.
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
A government advisor observes that countries with a higher percentage of households owning stocks also tend to have a higher average income per person. Based solely on this statistical association, the advisor proposes a policy to boost national prosperity by giving every citizen 100 shares of stock in a national fund. Which statement offers the most accurate and fundamental critique of the advisor's policy reasoning?
Critiquing Economic Policy Reasoning
Analyzing Economic Relationships
Deconstructing the Finance-Growth Nexus
An economist observes that in countries where a larger percentage of households have taken out loans from financial institutions, the average income per person is also higher. Based on this statistical association alone, it is a valid conclusion that government policies encouraging more household borrowing will directly cause an increase in the nation's average income.
An economist observes a strong positive statistical association between the size of a country's financial sector and its average citizen's standard of living. Match each potential explanation for this association with the economic reasoning it represents.
Evaluating Economic Development Policy
Evaluating a Development Strategy
Proposing a Causal Mechanism
An economic analyst studies 50 countries over 20 years and finds a consistent, strong positive statistical association between the number of banks per capita and the average national income. Based only on this finding, which of the following is the most logically sound conclusion the analyst can draw?