Question

An economics student is studying the American economy and finds that the correlation between the inflation-adjusted Dow Jones Industrial Average and the Gross Domestic Product (GDP) (also inflation adjusted) is 0.81 for the years 1946 to 2011. (www.measuringworth.com). From that he concludes that there is a strong linear relationship between the two series and predicts that a drop in the GDP will make the stock market go down. Here is a scatterplot of the adjusted DJIA against the GDP (in the years 1946 to 2011). Describe the relationship and comment on the student’s conclusions.


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  • CreatedMay 14, 2015
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