A recent study by the World Bank wished to determine whether there was a relatio

Question

A recent study by the World Bank wished to determine whether there was a relationship between the abundance of natural resources in a country and its long term rate of economic growth Their study used 40 (n) countries over a long period to 1995 Letting Y be the rate ot growth measured as a percentage and X be a measure or natural resource abundance, the tollowing relationship between the two variables was estimated. Standard errors of bp and b1 are reported in parentheses below the coemcients of bp and b =5358-00048 X (1.380) (0.0029) To test the significance of the relationship, a 5% level of significance was adopted. . State the direction of the alternative hypolhesis used to test the statistical significance of the relationship. Type gt (greater than). ge (greater than or equal to), (ess than), le (less than or equal to) or ne (not equal to) as appropriate in the box 2. Calculate the test statistic, reporting your answer to two decimal places. 3. Use the tables in the textbook to determine the cntical value (in absolute terms) to three decimal places 4. Is the null hypothesis rejected for this test? Type yes or no. 5. Disregarding your answer in part 4, if the null thypothesis was not rejected, would there appear to be a linear relationship between resource abundance and ecanomic growth? Type yes or no.

Explanation / Answer

Null hypothesis:

H0:slope=0

Alternative Hypothesis

H1:slope not =0

Non directional two tail test

SOlution2:

t=slope/std derrr

=-0.0048/0.0029

=-1.66

Solution3:

derees of freedom=n-2=40-2=38

alpha=0.05

t crit=2.024

Solution4:

tcal< t crit

Fail to Reject Null hypothesis

AccepT Null hypothesis

ANSWER NO

solution5:

ANSWER YES

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