At the Stock and Watson (Http://www

Essay

At the Stock and Watson (http://www.pearsonhighered.com/stock_watson)website go to Student Resources and select the option "Datasets for Replicating Empirical Results." Then select the "CPS Data Used in Chapter 8" (ch8_cps.xls)and open it in Excel. This is a rather large data set to work with, so just copy the first 500 observations into a new Worksheet (these are rows 1 to 501).
In the newly created Worksheet, mark A1 to A501, then select the Data tab and click on "sort." A dialog box will open. First select "Add level" from one of the options on the left. Then select "sort by" and choose "Northeast" and "Largest to Smallest." Repeat the same for the "South" as a second option. Finally press "ok."
This should give you 209 observations for average hourly earnings for the Northeast region, followed by 205 observations for the South.
a. For each of the 209 average hourly earnings observations for the Northeast region and separately for the South region, calculate the mean and sample standard deviation.
b Use the appropriate test to determine whether or not average hourly earnings in the Northeast region the same as in the South region.
c Find the 1%, 5%, and 10% confidence interval for the differences between the two population means. Is your conclusion consistent with the test in part (b)?
d In all three cases of using the confidence interval in (c), the power of the test is quite low (5%). What can you do to increase the power of the test without reducing the size of the test?