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3 Rules

Decision Rule for tcritical value approach


- Two tailed: reject null if abs[test] > t crit
- Right tailed: reject null if test > t crit
- Left tailed: reject null if test < -t crit

1. n=31, df = n-1 = 31-1 = 30, 𝑥̅ = 40, SE = 10


For an 80% confidence interval, the bounds will be:
(𝑥̅ ± T(30)0.1 * SE)
(40 ± 1.3 * 10)
(27, 53)

2. a) It would be wider due to the increased coverage of the data.


s
b) It would be smaller because as seen through the standard error formula ( ). (An increase
√n
in n would decrease the size of SE and the length of the CI would also decrease accordingly.
c) It would be the same, as the length of the confidence interval is dependent not on the
sample mean but on the size as well as the standard deviation of the sample.
s
d) It would be larger because as seen through the standard error formula ( n). (An increase

in s would increase the size of SE and the length of the CI would also increase accordingly.

3.
a) n=25, df = n-1 = 25-1 = 24
For an 95% confidence interval, the bounds will be:
(𝑥̅ ± T(24)0.025 * SE)
2
(1.2 ± 2.0639 * )
√25
(0.37444, 2.02556)

b) Let g = mean economic growth


𝐻0 : g = 0
𝐻𝑎 : g ≠ 0

Decision Rule: Reject 𝐻0 if abs[t(24)0.025] < abs[t(test)]

𝑥̅ − 𝐻0 1.2 − 0
t(test) = SE
= 2/5
=3

t(24)0.025 = 2.0639 < t(test)


Therefore, we can reject the null hypothesis in favour of the alternative, and can
conclude the real GDP growth will be non-zero. There is sufficient evidence at alpha
=0.05 to reject the claim economic population growth is 0.

c)
𝐻0 : g ≥ 0
𝐻𝑎 : g < 0

Decision Rule: Reject 𝐻0 if lower bound of 95% CI < 0

DR: reject 𝐻0 if tstat < - tcrit


Tcrit: t(24)0.05 = 1.711

2
T(test) = (1.2 – 0)/( )=3
√25
Decisions: fail to reject null as 3> -1.711

Therefore there is insufficient evidence at alpha = 0.05 that economic is less than zero.

For an 95% confidence interval, the bounds will be:


(𝑥̅ ± T(24)0.025 * SE)
2
(1.2 ± 2.0639 * )
√25
(0.37444, 2.02556) (part a)

Therefore, we can be 95% confident that the forecasted economic growth for the next
year will lie between 0.37% and 2.03%, and would it be extremely unlikely for it to be
negative.

4.
a)
n = 90, df = n-1 = 90-1 = 89
For an 95% confidence interval, the bounds will be:
(𝑥̅ ± T(89)0.25 * SE)
19.73
(32.81 ± 1.987 * )
√90
(28.68, 36.94)

b) Let h = mean usual hours worked


𝐻0 : h = 35
𝐻𝑎 : h ≠ 35

Decision Rule: Reject 𝐻0 if t(89)0.005 < abs[t(test)] (double-sided test)

𝑥̅ − 𝐻0 32.81 − 35
t(test) = SE
= 19.73/√90
= [-1.05] = 1.05

t(89)0.005 = 2.632 > t(test)


Therefore, we are unable to reject the null hypothesis in favour of the alternative due to
insufficient evidence.
c) Let h = mean usual hours worked
𝐻0 : h < 35
𝐻𝑎 : h ≥ 35

Decision Rule: Reject 𝐻0 if t(89)0.1 < abs[t(test)] (one-sided test)

𝑥̅ − 𝐻0 32.81 − 35
t(test) = SE
= 19.73/√90
= [-1.05] = 1.05

t(89)0.1 = 1.291 > t(test)


Therefore, we are unable to reject the null hypothesis in favour of the alternative due to
insufficient evidence.

5. a)
𝐻0 :  = 196
𝐻𝑎 :  ≠ 196

Decision Rule: Reject 𝐻0 if t(89)0.05 < abs[t(test)] (two-sided test)

𝑥̅ − 𝐻0 197.9761 − 196
t(test) = SE
= 10.33765/√90
= [] =

Decision Rule: Reject 𝐻0 if p-value < 0.05 = alpha

P value = 0.0731 > 0.05 = alpha


Decision: Therefore our test fails to reject the null

b)
𝐻0 :   196
𝐻𝑎 :  > 196

Decision Rule: Reject 𝐻0 if p-value < 0.05 = alpha

P value = 0.0366 < 0.05 = alpha


Decision: Therefore, we are able to reject the null

c)
𝐻0 :   196
𝐻𝑎 :  < 196

Decision Rule: Reject 𝐻0 if p-value < 0.05 = alpha


P value = 0.9634 > 0.05 = alpha
Decision: Therefore, our test fails to reject the null

d) The CI is given by
𝑥̅ +- se(𝑥̅ ) x t(df)0.05
197.9761 ± 1.09 x t(89)0.05
[196.16, 199.79]

CI for mew at the 90% level.

e) 𝐻0 :  = 150
𝐻𝑎 :  ≠ 150

Decision Rule: Reject 𝐻0 if t(89)0.05 < abs[t(test)] (two-sided test)


t(89)0.05 = 1.66

The t(test) is t =(197-150)/1.09 = 4.31

Therefore reject the null as [43.1] > 1.66

6 a)
𝐻0 : (1) = (2) => (1) - (2) = 0
𝐻𝑎 : (1) ≠ (2) => (1) - (2) ≠ 0

Decision Rule: reject null hypothesis if abs[t(test)] < abs[t(179)0.025]

DR: reject null if p-value < 0.05 (= alpha)

Decision is to not reject null as the p-value > alpha

Therefore there is insufficient evidence to reject the claim low and middle/hig income
countries grow at the same rate.

𝑥̅ (1) - 𝑥̅ (2) = 2.88748 – 2.119283 = 0.768197

On a significance level of alpha = 0.05,

t(179)0.025 ~ 1.9719

abs[t(test)] = 1.8545 < abs[t(179)0.025]

Therefore, we are unable to reject the null hypothesis in favour of the alternative on a
significance level of 5%. In other words, the claim that the average GDP growth of lower
income countries equates to the average GDP growth of higher income countries cannot be
eliminated.

b)
There is sufficient evidence to support the claim low income countries grow faster than
middle/high income countries

C ) There are errors with hypothesis tests, type I and type II errors.
Type I error is rejecting a true null hypothesis
Type II error is not rejecting a false null hypothesis

In a) we could’ve made a Type II error because the null may have been false, and in b) we
could’ve made a Type 1 error where we did reject the null when in fact it may have been
true.

𝐻0 : (1)  (2) => (1) - (2)  0


𝐻𝑎 : (1) > (2) => (1) - (2) > 0

Decision Rule: reject null hypothesis if abs[t(test)] < abs[t(179)0.025]

𝑥̅ (1) - 𝑥̅ (2) = 2.88748 – 2.119283 = 0.768197


11
On a significance level of alpha = 0.05,

t(179)0.025 ~ 1.9719

abs[t(test)] = 1.8545 < abs[t(179)0.025]

Therefore, we are unable to reject the null hypothesis in favour of the alternative on a
significance level of 5%. In other words, the claim that the average GDP growth of lower
income countries equates to the average GDP growth of higher income countries cannot be
eliminated.