Economics Principles and Hypotheses

Flashcards covering key terms and concepts related to economic observations, hypotheses, and biases.

Observation

An objective description of data collected about the economy that remains valid regardless of the observer.

Hypothesis

A proposed explanation for observed data that can be tested through further investigation.

Confirmation Bias

The tendency to focus on information that confirms existing beliefs while ignoring information that contradicts them.

Causation

A relationship where one variable directly influences another variable.

Correlation

A statistical measure that describes the extent to which two variables move in relation to each other.

Spurious Correlation

A correlation that appears to exist between two variables but is actually due to chance or the influence of a third variable.

Reverse Causality

A situation where it is mistakenly believed that one variable causes a change in another variable, when in fact the reverse is true.

Omitted Variable Bias

A bias that occurs when a model incorrectly leaves out one or more important factors that influence the relationship being studied.