The correlation coefficient between advertising spending and sales is calculated as +0.92. What does this indicate?
Answer and explanation
Correct answer: C. A strong positive linear relationship between advertising and sales
- Step 1: A coefficient close to +1 means a strong positive linear relationship.
- Step 2: It does not show causation.
- Step 3: 92% is not a proportion explained; the coefficient of determination is r² = 0.846 (84.6%).
Answer
A strong positive linear relationship between advertising and sales.
Why not the others: Advertising causes 92% of sales: Correlation does not prove causation. The coefficient is not a percentage of sales caused. A positive sign means the variables move in the same direction. A coefficient close to zero would indicate this, but 0.92 is close to 1.
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