Calculating the t-statistic for Hypothesis Testing on Correlation
The Spearman’s rank correlation coefficient is a non-parametric statistical test used to examine whether there is a significant relationship between two sets of data. Like the correlation coefficient, Spearman’s rank correlation can have any value between –1 and +1. A…
Hypothesis Test Concerning the Equality of the Population Means
Analysts are often interested in establishing whether there exists a significant difference between the means of two different populations. For instance, they might want to know whether the average returns for two subsidiaries of a given company exhibit a significant…
Decision Rules in Hypothesis Tests
The decision rule refers to the procedure followed by analysts and researchers when determining whether to reject or not to reject a null hypothesis. We use the phrase “not to reject” because it is considered statistically incorrect to “accept” a…
Test Statistic, Type I and Type II Errors, Power of a Test, and Significance Levels
A test statistic is a standardized value computed from sample information when testing hypotheses. It compares the given data with what an analyst would expect under a null hypothesis. As such, it is a major determinant of the decision to…
Expansionary and Contractionary Fiscal Policies
Fiscal policies are carried out by the legislative and sometimes, the executive branch of the government. The two main instruments of fiscal policy are taxes and government expenditure. The government amasses taxes to finance its expenditures. Therefore, fiscal policy can…
Implementing of Fiscal Policy
Fiscal policy refers to all the methods used by a government to influence the economy through tax rates and government expenditures. For example, a government may decide to reduce taxes. These moves should, in theory, stimulate the economy and thereby,…
Size of a National Debt Relative to GDP
The national debt is the total amount of money owed by the central government. It is important for a country to grow its economy and, at the same time, reduce its national debt. Many believe that government debt can cause…
