There are four possible outcomes in the hypothesis testing situation. The four possible outcomes are shown in the figure above. There are two possibilities for a correct decision and two possibilities for a wrong decision.
Correct decision happens when
- H0 is false and it is rejected (This is our target)
- H0 is true and it is not rejected
Incorrect decision happens when
- H0 is false and it is not rejected
- H0 is true and it is rejected (We must reduce this error)
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