Does correlation always imply causation? Why or why not? Explain with the help of real-life examples
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No, correlation does not always imply causation. Both causation and correlation study the relationship between two or more variables and are therefore often mistaken for each other. Correlation means that there is a mutual relationship between two variables; as one variable changes the other changes as well. Correlation between two variables does not necessarily imply that one causes the other. Correlation just enquires into the strength of association between two variables, whereas causation occurs when one variable directly affects the other variable through a causal relationship. For example, if a bakery starts using some new packaging material, and it improves the shelf life of bread, it represents a causal relationship. On the other hand, if someone claims watching violent movies increases crime rates in a country, it is not necessarily a causal relationship. However, some degree of correlation may exist between both.
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Last year the CPI was 177.1 and this year the CPI is 180.9. What was the inflation rate between these two years?
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A basket of goods cost $800 in the U.S. The same basket of goods costs $1,000 in France and the exchange rate is .80 euros per dollar. The same basket of goods costs 960 Australian dollars and the exchange rate is 1.2 Australian dollars per U.S. dollar. Purchasing power parity with the U.S. holds in
a. both France and Australia b. France but not Australia c. Australia but not France d. neither France nor Australia