Consider the following linear trend equation of an industry's sales: y_t = 120 + 12t, where t is measured in years and sales are measured in millions of dollars. Which is the most reasonable conclusion? A)We would forecast that sales will increase $12 million in the next year. B)We would forecast that sales will increase 12 percent in the next year. C)On the average, sales will increase 12/(120 + 12 × 10) = 0.05, or 5 percent next year. D)The year-to-year change will depend on the value of t.

Question

Quizplus · Accepted Answer

The linear trend equation shows a constant increase of $12 million per year. Therefore, the most reasonable conclusion is that sales will increase by $12 million in the next year.

Consider the Following Linear Trend Equation of an Industry's Sales