The board of national central bank is meeting to decide if it should increase in

Question

The board of national central bank is meeting to decide if it should increase interest rates in order to slow inflation. State the null and alternative hypotheses regarding inflation that the board would formulate to guide its decision.

What are the null and alternative hypotheses?

A. H: No change in interest rates is warranted.

    H: Increase interest rates in order to slow inflation.

B. H: Reduce interest rates in order to slow inflation.

    H: Increase interest rates in order to slow inflation.

C. H: Increase interest rates in order to slow inflation.

    H: Reduce interest rates in order to slow inflation.

D. H: No change in interest rates is warranted.

    H: Change interest rates in order to slow inflation.

Explanation / Answer

Here boar want to test whether it should increase interest rates in order to slow inflation or not so alternate hypothesis will be

H: Increase interest rates in order to slow inflation.

And null hypothesis will be

H: No change in interest rates is warranted.

Correct option is A.

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