What is the "omitted variable" problem in determining cause and effect?
A)It is a problem that arises when an insignificant variable is given too much weight in an economic analysis leading to skewed conclusions about cause and effect.
B)It is a problem that arises when a significant variable is not given enough weight in an economic experiment leading to skewed conclusions about cause and effect.
C)It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic experiment leading to false conclusions about cause and effect.
D)It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect.

Question

Quizplus · Accepted Answer

The omitted variable problem is a common issue when trying to determine cause and effect in economic analysis. It occurs when a relevant variable that affects both the dependent and independent variables is left out of the analysis, leading to false conclusions about the relationship between the variables. This problem can be avoided by carefully selecting variables to include in the analysis and controlling for any relevant variables that may affect the relationship. Option D correctly describes this problem.

What Is the "Omitted Variable" Problem in Determining Cause and Effect