Question

A November 2017 analysis by the Federal Reserve Bank (Atlanta & Cleveland) found that black owned small businesses are significantly less likely to obtain credit than white-owned small businesses with similar performance profiles and similar credit history. What type of two sample test was likely used in this analysis?

A.        A z test under independent sampling with known population variances.

B.        A t test under independent sampling with unknown and unequal population variances

C.        A t test under independent sampling with unknown but equal population variances.

D.        A paired t test under dependent sampling.

Answer 1

A. A z test under independent sampling with known population variances.

Explanation:

For the given scenario, we have to compare the two population means. From the given information, the population variances or standard deviations would be available due to availability of the previous credit history. So, we can use the z test under independent sampling with known population variances. We cannot use two sample t test because sample size for the banking data would be larger.