CFA Practice Question

CFA Practice Question

The population of accountants has a higher average earnings than the population of musicians. A statistician samples both populations to test the null hypothesis that the average earnings of both populations are not different. He finds that the mean of the sample for accountants is greater than the mean of the sample for musicians, however the t-statistic for the test is not large enough to reject at a pre-determined level of confidence. Hence the statistician concludes that the null cannot be rejected. This is an example of:
A. Neither Type I Error nor Type II Error as the correct test for difference of means has been used, and the t-statistic does not lie in the rejection region.
B. Type II Error
C. Type I Error
Explanation: Type II error is the failure to reject the null hypothesis when the null hypothesis is false. This is what happened here.

User Contributed Comments 2

User Comment
chcarnes How do you know the null hypothesis is false?
GBolt93 It tells us the true population means are different in the beginning.
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