If one variable increases while another decreases, how are these variables described?

The correct characterization of the situation where one variable increases while another decreases is that these variables are negatively correlated. Negative correlation indicates an inverse relationship between two variables. In statistical terms, when one variable rises, the other tends to fall, and this relationship can be quantified with a negative correlation coefficient, which ranges from 0 to -1. A value closer to -1 signifies a strong inverse relationship.

Understanding this concept is crucial in macroeconomics, as it helps analyze how different economic factors interact. For instance, if we look at interest rates and investment spending, an increase in interest rates (cost of borrowing) often leads to a decrease in investment spending by businesses.

In contrast to negative correlation, if two variables were described as positively correlated, both would increase or decrease together, while uncorrelated variables would show no discernible pattern in their movements. Independence among variables implies that one variable does not affect the other, meaning there is no correlation at all. Thus, when one variable increases as another decreases, negative correlation accurately describes this inverse relationship.