You want to test the hypothesis that the prime rate and inflation are independent.The following table of frequencies is prepared from a random sample,collected in various countries and various time periods: Based on an analysis of the data in this table,which conclusion can be made at α = .01?
A) The prime rate and inflation rate are independent.
B) The prime rate and inflation rate are not independent.
C) Small observed frequencies in some cells suggest that no reliable conclusion can be made.
D) Small expected frequencies in some cells suggest that no reliable conclusion can be made.

Question

You want to test the hypothesis that the prime rate and inflation are independent.The following table of frequencies is prepared from a random sample,collected in various countries and various time periods:  Based on an analysis of the data in this table,which conclusion can be made at α = .01?
A) The prime rate and inflation rate are independent. 
B) The prime rate and inflation rate are not independent. 
C) Small observed frequencies in some cells suggest that no reliable conclusion can be made. 
D) Small expected frequencies in some cells suggest that no reliable conclusion can be made.

Quizplus · Accepted Answer

The chi-square test for independence can be used to test the hypothesis that the prime rate and inflation are independent. The calculated chi-square value of 36.162 exceeds the critical value of 18.307 at α = .01 with 6 degrees of freedom. Therefore, we reject the null hypothesis that the prime rate and inflation rate are independent and conclude that they are not independent.

You Want to Test the Hypothesis That the Prime Rate