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UW-Madison
ECON 310 -
Problem Set 3 Answers
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University of Wisconsin, Madison
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1Economics 310 Menzie D. Chinn Spring 2004 Social Sciences 7418 University of Wisconsin-Madison Problem Set 3 Answers23456 Y.17Y.28Y.3 a) The 99% confidence interval isx ± zα/2σ√n= .005254 ± 2.575 ×.007765√136= .005254 ± .0017145= (.006969, .003540)b) The t-statistic ist =x−µs/√n=.007244−.004358(.006453/√36)=.002706.0010755= 2.516For 35 d.f. we havet.05/2= t.025=2.042+2.0212= 2.03152.516 > 2.0315 ⇒we reject the hypothesis.Assumptions are:i) Underlying variable is normally distributed.ii) 0.4538 is thought of fixed, not random variable.c) No, since everything would be multiplied by 4.The new t-statistic t0ist0=.028976−.018152.025812/√36= 2.516which is equal to the t-statistic t found in part
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