Chapter 3, Exercise Solutions, Principles of Econometrics, 3e33Exercise 3.1 (continued) (d) Testing 01:0Hβ =against 11,Hβ >uses the same t-value as in part (b), t= 1.92. Because it is a one-tailed test, the critical value is chosen such that there is a probability of 0.05 in the right tail. That is, (0.95,38)1.686ctt==. Since t= 1.92 > ct= 1.69, 0His rejected, the alternative is accepted, and we conclude that the intercept is positive. In this case p-value = P(t> 1.92) = 0.0311. We see from Figure xr3.1(b) that having the p-value < 0.05 is equivalent to having t> 1.69. 0.00.10.20.30.4-3-2-10123TPDF1.92ctRejection RegionFigure xr3.1(b) Rejection region and observed tvalue for Exercise 3.1(d) (e) The term "level of significance" is used to describe the probability of rejecting a true null hypothesis when carrying out a hypothesis test. The term "level of confidence" refers to
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