Figure 2-20
Relationship Between Years of Education and Annual Income
-Refer to Figure 2-20.Senator Smith observes the graph and concludes that people who earn higher incomes attend school for more years.Senator Jones observes the graph and concludes that people who attend school for more years earn higher incomes.Who is correct?
A)Senator Smith is correct.
B)Senator Jones is correct.
C)It is difficult to say which senator might be correct due to the reverse causality problem.
D)It is difficult to say which senator might be correct due to omitted variable bias.

Question

Figure 2-20
Relationship Between Years of Education and Annual Income 
-Refer to Figure 2-20.Senator Smith observes the graph and concludes that people who earn higher incomes attend school for more years.Senator Jones observes the graph and concludes that people who attend school for more years earn higher incomes.Who is correct?
A)Senator Smith is correct. 
B)Senator Jones is correct. 
C)It is difficult to say which senator might be correct due to the reverse causality problem. 
D)It is difficult to say which senator might be correct due to omitted variable bias.

Quizplus · Accepted Answer

The reverse causality problem makes it difficult to determine whether higher income leads to more years of schooling or more years of schooling lead to higher income.

Figure 2-20 Relationship Between Years of Education and Annual Income