Hypothesis testing with normal distribution

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Understanding the significance level in hypothesis testing is crucial as it defines the threshold for determining whether a sample mean significantly deviates from the population mean. While the Central Limit Theorem indicates that sample means will approximate a normal distribution, simply identifying outliers based on standard deviations is insufficient. The significance level provides a more systematic approach to assess the likelihood of Type I errors, or false positives, in rejecting the null hypothesis. This method is preferred over arbitrary rules, as it quantifies the probability of making an error. Thus, the significance level is essential for making informed decisions in hypothesis testing.
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Hypothesis testing with normal distribution...

I've been learning about Hypothesis testing with normal distribution, but I don't understand the need for the significance level. By this I mean that i understand that according to the Central Limit Theorem a distribution of the means will be a normal distribution (for a sufficiently large value of n ) with a mean of the mean of the initial population and a standard deviation equal to the standard deviation of the population divided by the square root of n. However, to see whether we think a sample no longer fits the original popultion (as is the aim of hypothesis testing) I would have initially guessed that you would see if the mean of the sample being tested was an outlier - ie: its mean was 2 standard deviations out of the "mean distribution". However, this is apparently not the case - we instead use a significance level, and this should apparently tell us the boundary for whether the teasted sample is still relevant to the parent population or not - even if this significance level is above or below 2 sds of the mean; its is this significance level that matters not whether the mean of the tested sample is an outlier. Why is this the case?

Thanks in advance. :-p
 
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With hypothesis testing you can determine what the actual probability of making an error is. Saying "reject the hypothesis if the sample statistic is 2 st. dev. away from it" is just an arbitrary rule-of-thumb.
 
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