If an economic time series is growing by a percentage amount each period, the most accurate forecast model is:
A)a simple regression model.
B)a multiple regression model.
C)a linear trend.
D)log-linear model.

Question

Quizplus · Accepted Answer

If the economic time series is growing by a percentage amount each period, then a log-linear model would be the most accurate forecast model. This is because a log-linear model can capture both the growth rate and the underlying linear trend in the data. A simple regression model and a linear trend model may not be able to capture the nonlinear growth pattern in the data, while a multiple regression model may not be necessary if there is only one independent variable (time). If the economic time series is growing by a percentage amount each period, then a log-linear model is the most appropriate forecast model. This is because it accounts for the compounding effect of growth over time and linearizes the data by taking the logarithm of both the dependent and independent variables, making it easier to interpret the coefficients and forecast future values. A simple regression model or a linear trend would not capture the compounding effect of growth, while a multiple regression model may not be necessary if there is only one independent variable (time).

If an Economic Time Series Is Growing by a Percentage