Students Who Graduated from College in Last Year with Student

question 52

Essay

Students who graduated from college in last year with student loans owed an average of $25,250 (The New York Times, November 2). An economist wants to determine if the average debt has increased since last year. She takes a sample of 40 recent graduates and finds that their average debt was $28,275. Assume that the population standard deviation is $7,250.
A) Specify the competing hypotheses to determine whether the average undergraduate debt has increased since last year.
B) Calculate the value of the test statistic and the p-value.
C) At the 5% significance level, can you conclude that the average undergraduate debt has increased? Explain.

• A) Specify the competing hypotheses to determine whether the average undergraduate debt has increased since last year.
• B) Calculate the value of the test statistic and the p-value.
• C) At the 5% significance level, can you conclude that the average undergraduate debt has increased? Explain.

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Definitions:

Budget

An estimation of revenue and expenses over a specified future period of time, often used as a plan for management of money.

Convex Set

In mathematics, a set where, for every pair of points within the set, every point on the line segment between them is also within the set.

Interest Rate

The cost of borrowing funds, typically expressed as a percentage of the total amount loaned, which accrues over time.

WARP

stands for Weak Axiom of Revealed Preference, a principle in consumer theory that states if a consumer prefers bundle A to bundle B when both are affordable, then the consumer will not choose B when A is affordable.