Question

What is the "omitted variable" problem in determining cause and effect? 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. 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. 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. 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?

Answer 1

The correct choice from the given options is "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."

The term omitted variable alludes to any factor excluded as a independent variable in the relapse that may impact the dependent variable. The omitted variable inclination is a typical and major issue in relapse investigation. By and large, the issue emerges in the event that one doesn't think about every single significant variable in a relapse. For this situation, one abuses the primary suspicion of the supposition of the classical linear regression model.