Steps Needed to Estimate a p-value for B3= 0
- Click on the radio box containing “Enter mean, SEM and N.” Mean is the parameter value we estimated, SEM is the standard error, and N is the number of observations.
- Enter -13.7194 in the box labelled “Mean:”.
- Enter 1.4186 in the box labelled “SEM:”
- Enter 179 in the box labelled “N:”, as this is the number of observations we had.
- Under “3. Specify the hypothetical mean value” click on the radio button beside the blank box. In that box enter 0, as that is our hypothesis.
- Click “Calculate Now”
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P value and statistical significance:
The two-tailed P value is less than 0.0001
By conventional criteria, this difference is considered to be extremely statistically significant.
We used U.S. data to test our hypotheses about the effect disposable income and the prime rate have on personal consumption expenditure. The first part of my theory was that consumers keep a set amount of money aside for investment and emergency, and spend the rest of their disposable income on consumption goods, so MPC = 1. The second part of my theory was that there is no link between the prime rate and personal consumption expenditure, so all else being equal, we should see no change in the level of the propensity to consume as the prime rate changes. It turns out I was wrong on both counts; we saw that our estimate of the MPC was statistically different than 1. Since our marginal propensity to consume is not 1, we know that when consumers earn an additional dollar, they do not allocate the whole dollar to spending. Similarly my hypothesis about the prime rate was wrong; we found that the effect the prime rate has on consumption expenditure is significantly different than zero.
Now you've seen how to calculate and use one-sample t-tests, you will be able to interpret the numbers you've calculated in your regression.
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