Here is the instruction of this project, the files you need are attached.

Download the Excel data file CPS92_12 (cps92_12.xlsx). It contains data on full-time workers, ages 25-34, with a high school diploma or BA/BS as their highest degree for the years 1992 and 2012. A detailed description is given in CPS92_12_Description (CPS92_12_Description.pdf). Use these data to answer the following questions. Please TYPE your answers in a word file.

1. (8 points)

a) Compute the sample mean for average hourly earnings (AHE) in 1992 and 2012.

b) Compute the sample standard deviation for AHE in 1992 and 2012.

c) Construct a 95% confidence interval for the population means of AHE in 1992 and 2012.

d) Construct a 95% confidence interval for the change in the population mean of AHE between 1992 and 2012. ( Since the number of observations in 1992 and in 2012 are not equal, you need to use the following formula for the standard error of the difference between means SM1 – M2 : =

$\sqrt{\frac{s_1^2}{n_1}+\frac{s_2^2}{n_2}},$

where s1 and s2 are sample standard deviations for each group, and n1 and n2 are the corresponding sample sizes. )

2. (8 points) In 2012 the value of the Consumer Price Index (CPI) was 229.6. In 1992, the value of the CPI was 140.3. Repeat (1), but use AHE measured in real 2012 dollars ($2012); that is, adjust the 1992 data for the price inflation that occurred between 1992 and 2012.

(Hint: To convert a dollar of earnings in 1992 into the same purchasing power as a dollar in 2012, the 1992 dollar must be multiplied by the CPI in 2012 divided by the CPI in 1992, that is, by 229.6/140.3. )

3. (2 points) If you were interested in the change in workers’ purchasing power from 1992 to 2012, would you use the results from (1) or from (2)? Explain.

4. (6 points) Using the data for 2012:

a) Construct a 95% confidence interval for the mean of AHE for high school graduates.

b) Construct a 95% confidence interval for the mean of AHE for workers with a college degree.

c) Construct a 95% confidence interval for the difference between the two means.

5. (6 points) Repeat (4) using the 1992 data expressed in $2012.

Extra-Credit Questions

(If your total grade for this class is 88%, scoring 4 extra points will boost your total grade to 92%.)

6. (4 extra points) Using appropriate estimates, confidence intervals, and test statistics, answer the following questions:

a) Did real (inflation adjusted) wages of high school graduates increase from 1992 to 2012? Explain.

b) Did real wages of college graduates increase? Explain.