Question

Suppose that a company's sales increase when the economy is doing well. Also, suppose that the
company's advertising budget is based upon the number of sales, and that larger sales lead to a larger
advertising budget.
A There is an association between how well the economy is doing and the company's advertising budget.
B There is a causal relationship between the company's sales and the company's advertising budget.
C Both of the above.
D Neither of the above.

Answer 1

A correlation is a measure or degree of relationship between two variables.

A causal relation between two events exists if the occurrence of the first causes the other.

A correlation between two variables does not imply causation. On the other hand, if there is a causal relationship between two variables, they must be correlated.

consider the positive correlation between the number of hours you spend studying for a test and the grade you get on the test. if you spend more time studying, it results in a higher grade,so there is causal relation also exists between the number of hours you spend studying and test grades,

We are given that company's advertising budget is based upon the number of sales, and that larger sales lead to a larger advertising budget.it implies that there is a causal relationship between the company's sales and the company's advertising budget.

Also we are provided that a company's sales increase when the economy is doing well,therefore there is positive correlation between company's sales and economy. as there is causal relationship between company's sales and the company's advertising budget, there is an association exists between how well the economy is doing and the company's advertising budget.

So option c ) both of the above is the correct answer.