Question

Economists suggest that students not accrue more than $2000 in credit card debt before graduating from college. In 2004, the Nellie Mae organization surveyed a random sample of 1074 U.S. college students about their credit situation and used the data to test the hypotheses: Ho: - 2000 Hoiu > 2000, where is the mean credit card debt for all US college students in 2004. The students in the survey had an average credit card debt of $2169. The p-value for the test was 0.0026. a) Write a conclusion for the test using alpha 0.05. This answer has not been graded yet. b) The p-value, 0.0026, is a probability. Explain what probability it represents This answer has not been graded yet.

Answer 1

It is a one tailed test.

a) Since, Pvalue = 0.0026 < 0.05, we reject Ho at 5% level of significance and conclude that the mean credit card debit for US students in 2004 was significantly greater than 2000.

b) Pvalue = P(xbar > 2169)

I.e the Probability of getting sample mean xbar as 2169 or more, Under Ho.

In other words, probability of getting sample mean as extreme as the observed mean of 2169 in the direction of H1, under Ho