An economist uses the regression model Inflation=f(unemployment) to test the Phillips Curve theory on South African data. A slope of -0.21 is estimated, and the economist wants to do a hypothesis test to check whether the true value is negative. Would it be appropriate to conduct a two-sided test on the slope parameter? What would the appropriate H0 and H1 be? A. Yes, because the theory suggests a negative slope, therefore it is of interest to determine whether the slope coefficient is different from zero. H0=0 and H1≠0. B. Yes, because the only test of interest is whether the slope estimate is equal to zero or not. H0=0 and H1≠0. C. Yes, because the slope could be either negative or positive and the hypothesis test is based on the t distribution which takes negative or positive values. H0=0 and H1≠0. D. No, because the theory suggests a negative slope, therefore it is of interest whether or not the β2 coefficient is negative rather than different from zero. H0=0 and H1<0. E. No, it is important to test whether the slope parameter is positive. H0=0 and H1>0.

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Answered: An economist uses the regression model…

College Algebra

7th Edition

ISBN:9781305115545

Author:James Stewart, Lothar Redlin, Saleem Watson

Publisher:James Stewart, Lothar Redlin, Saleem Watson

Chapter1: Equations And Graphs

Section: Chapter Questions

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An economist uses the regression model Inflation=f(unemployment) to test the Phillips Curve theory on South African data. A slope of -0.21 is estimated, and the economist wants to do a hypothesis test to check whether the true value is negative. Would it be appropriate to conduct a two-sided test on the slope parameter? What would the appropriate H0 and H1 be?

A. Yes, because the theory suggests a negative slope, therefore it is of interest to determine whether the slope coefficient is different from zero. H0=0 and H1≠0.
B. Yes, because the only test of interest is whether the slope estimate is equal to zero or not. H0=0 and H1≠0.
C. Yes, because the slope could be either negative or positive and the hypothesis test is based on the t distribution which takes negative or positive values. H0=0 and H1≠0.
D. No, because the theory suggests a negative slope, therefore it is of interest whether or not the β2 coefficient is negative rather than different from zero. H0=0 and H1<0.
E. No, it is important to test whether the slope parameter is positive. H0=0 and H1>0.

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