Short-run Macroeconomic Equilibrium Above or Below Full Employment
Short-run macroeconomic equilibrium only occurs when the amount of real GDP demand equals the amount of GDP supply. On a graph, this happens at the point where the AD curve intersects the short-run average supply curve, exactly on the long-run…
Functions and Definitions of Money
Definitions of Money According to Growther, money refers to anything that is generally accepted as a means of exchange. What’s more, it is that which at the same time acts as a measure and store of value. John Maynard Keynes…
Perfect Competition, Monopolistic Competition, Oligopoly, and Pure Monopoly
Market structure can be defined as the characteristics of a market, which can either be competitive or organizational. Moreover, market structure outlines the nature of the competition and the pricing procedure in a market. Therefore, it describes the number of…
Testing Independence based on Contingency Table Data
To test the relationship between two categorical variables, we use a contingency table and a test of independence based on a chi-square distribution. The test statistic is calculated as follows: $$\chi^{2}=\sum_{i=1}^{m} \frac{\left(O_{i j}-E_{i j}\right)^{2}}{E_{i j}}$$ Where : \(E_{i j}=\frac{(\text {…
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…
Significance of a Test in the Context of Multiple Tests
Type I error occurs when we reject a true null hypothesis. Type I error is also referred to as a false positive result because the null is true, but it is rejected (the false positive). The expected part of a…
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…
Compare Methods by which Companies can be Grouped
Products and/or Services Supplied The most widely used industry classification method is the grouping of companies offering similar products and/or services. A company’s classification is usually based on its principal business activity or the source from which the company derives…
