Question 1

Which of the following is a Lagging Economic Indicator? A)change in average labor costs in manufacturing B)M₂ measure of the money supply C)industrial production D)None of the above

Accepted Answer

A change in average labor costs in manufacturing is a lagging economic indicator because it reflects changes in the overall economy after they have already occurred. This is because labor costs are typically set by contracts or negotiations that occur after changes in the economy have already taken place. B and C are not lagging economic indicators, with M₂ measure of the money supply being a leading indicator and industrial production being a coincident indicator.

Question 2

The forecasting method that involves using an average of past observations to predict the future (if the forecaster feels that the future is a reflection of some average of past results)is the
A)moving average method.
B)econometric forecasting method.
C)exponential smoothing method.
D)Both A and B
E)Both A and C

Accepted Answer

The moving average method and the exponential smoothing method both involve using past observations to predict the future, with the assumption that future values will reflect some average of past results. The moving average method uses a simple average of past data points, while exponential smoothing assigns exponentially decreasing weights to older observations.

Question 3

Which of the following is the exponential trend equation to forecast sales (S)? A)S = a + b(t) B)S = a + b^t C)S = a + b(t)+ c(t)² D)None of the above

Accepted Answer

The exponential trend equation to forecast sales is typically of the form S = aebt, where a and b are constants and t represents time. Choice B is the closest to this form, with ^and indicating the starting value of sales and the growth rate, respectively.

Question 4

Charting observations on a semi-logarithmic graph will help the analyst to ascertain whether
A)absolute changes from period to period are constant.
B)whether percentage changes from period to period are constant.
C)whether percentage changes from period to period are declining.
D)Both B and C

Accepted Answer

A semi-logarithmic graph has a logarithmic scale on one axis and a linear scale on the other. When data is plotted on this type of graph, it allows us to visualize changes in percentage terms. If the slope of the line on the graph is constant, it means that percentage changes from period to period are also constant (Option B). If the slope of the line is decreasing, it means that percentage changes from period to period are declining (Option C). Therefore, both Option B and Option C are correct. Option A is incorrect as absolute changes cannot be measured on a semi-logarithmic graph.

Question 5

Among the advantages of the least-squares trend analysis techniques is
A)the ease of calculation.
B)relatively little analytical skill required.
C)its ability to provide information regarding the statistical significance of the results.
D)All of the above

Accepted Answer

The advantages of least-squares trend analysis techniques are that they are easy to calculate, require relatively little analytical skill, and can provide information regarding the statistical significance of the results. Therefore, the correct answer is D, All of the above.

Question 6

$\text {The following questions refer to this regression equation, (standard errors in parentheses.)}$
$$\mathrm { Q } = 8,400 - 10 \mathrm { P } + 5 \mathrm {~A} + 4 \mathrm { Px } + 0.05 \mathrm { I } , ( 1,732 ) ( 2.29 ) ( 1.36 ) ( 1.75 ) 0.15 )$$
$\begin{array} { l } 
\mathrm { R } ^ { 2 } = 0.65 \
\mathrm {~N} = 120 \
\mathrm {~F} = 35.25
\end{array}$
$\text {Standard error of estimate $= 34.3$}$
$\text {$Q =$ Quantity demanded}$
$\text {$\mathrm { P } =$ Price $= 1,000$}$
$\text {$\mathrm { A } =$ Advertising expenditures, in thousands $= 40$}$
$\text {$\mathrm { PX } =$ price of competitor's good $= 800$}$
$\text {$\mathrm { I } =$ average monthly income $= 4,000$}$
-Calculate t-statistics for each variable and explain what this tells you.

Accepted Answer

The answer of \(\text {The following questions refer to this...

Question 7

The firm is considering changing its price to $900.Predict the quantity demanded at that price,all other things equal and provide a 95% confidence interval on your estimate.(In doing this,explain the value of t-critical you will use in developing your 95% confidence interval.)

Accepted Answer

The answer of The firm is considering changing its price...

Question 8

How would you evaluate the quality of this equation overall? Do you have any concerns? Explain.

Accepted Answer

The answer of How would you evaluate the quality of...

Question 9

When would you use a one-tailed rather than a two-tailed t-test when checking significance levels?

Accepted Answer

The answer of When would you use a one-tailed rather...

Question 10

Quantitative forecasting that projects past data without explaining the reasons for future trends is called
A)scientific forecasting.
B)dumb forecasting.
C)empirical forecasting.
D)naïve forecasting.

Accepted Answer

Naïve forecasting is a quantitative method that simply projects past data into the future without taking into account any explanatory factors or reasons for future trends. It is also sometimes called the "no-change" or "last-value" forecast.

Question 11

The Delphi method is a
A)smoothing technique in forecasting.
B)consensual forecast based on expert opinions.
C)compound growth approach to forecasting.
D)naïve forecasting approach.

Accepted Answer

The Delphi method is a consensual forecasting technique that involves gathering opinions from a group of experts, analyzing those opinions and gradually coming to a consensus about the most likely outcome. This process is repeated until a high degree of consensus is achieved. It is often used in situations where there is high uncertainty, incomplete information or rapidly changing conditions, such as in technological forecasting, business planning or health care policy. Therefore, the best choice is B.

Question 12

Which of the following is not a drawback of forecasting using the compound growth rate method?
A)only considers first and last observations
B)considers only equal absolute changes
C)disregards fluctuations between the original and terminal observations
D)does not consider any trends in the data

Accepted Answer

The compound growth rate method does not assume equal absolute changes; instead, it calculates the average rate at which something grows over a period, considering the compounding effect. This method actually considers the overall growth from the first to the last observation, effectively compounding the growth across periods, which contradicts the notion of assuming equal absolute changes.

Question 13

A major problem in projecting with a trend line is that
A)only straight-line projections can be accommodated.
B)it is valid only if the trend is upward.
C)it will not forecast turning points in activity.
D)it is a very complex method of forecasting.

Accepted Answer

A trend line projection assumes that the trend will continue in a straight line, which may not be the case if there are turning points in activity. As a result, it can be difficult to accurately forecast with a trend line.

Question 14

The Trend Projection approach to forecasting is represented by
A)time-series regressions.
B)exponential smoothing.
C)opinion polls.
D)All of the above

Accepted Answer

The answer of The Trend Projection approach to forecasting is...

Question 15

When the more recent observations are more relevant to the estimate of the next period than previous observations,the naïve forecasting method to employ is
A)exponential smoothing.
B)compound growth rate.
C)trend analysis.
D)moving averages.

Accepted Answer

Exponential smoothing is a forecasting method that places more weight on the more recent observations, making it a suitable choice when they are more relevant to the estimate of the next period than previous observations. This weight is controlled by a smoothing parameter which determines the relative importance of past and present observations. As a result, exponential smoothing can produce more accurate forecasts than other methods, such as moving averages or trend analysis, when recent data is more important. Compound growth rate is not appropriate in this case as it assumes a constant rate of growth over time.

Question 16

What is multicollinearity? In general,how would you know if you had a problem with multicollinearity,and how could you correct it?

Accepted Answer

The answer of What is multicollinearity? In general,how would you...

Question 17

Among the advantages of the ________ technique of forecasting are ease of calculation,relatively little requirement for analytical skills,and the ability to provide the analyst with information regarding the statistical significance of results and the size of statistical errors.
A)least-squares trend analysis
B)compound growth rate
C)visual trend-fitting
D)expert opinion

Accepted Answer

The advantages mentioned in the question are all applicable to the least-squares trend analysis technique of forecasting. The other options do not necessarily provide information on statistical significance or errors, and may require more analytical skills or subjective judgment.

Question 18

Which of the following is a Leading Economic Indicator?
A)commercial and industrial loans outstanding
B)industrial production
C)average weekly duration of unemployment
D)None of the above

Accepted Answer

The answer of Which of the following is a Leading...

Question 19

$\text {The following questions refer to this regression equation, (standard errors in parentheses.)}$ $$\mathrm { Q } = 8,400 - 10 \mathrm { P } + 5 \mathrm {~A} + 4 \mathrm { Px } + 0.05 \mathrm { I } , ( 1,732 ) ( 2.29 ) ( 1.36 ) ( 1.75 ) 0.15 )$$ $\begin{array} { l } \mathrm { R } ^ { 2 } = 0.65 \ \mathrm {~N} = 120 \ \mathrm {~F} = 35.25 \end{array}$ $\text {Standard error of estimate $= 34.3$}$ $\text {$Q =$ Quantity demanded}$ $\text {$\mathrm { P } =$ Price $= 1,000$}$ $\text {$\mathrm { A } =$ Advertising expenditures, in thousands $= 40$}$ $\text {$\mathrm { PX } =$ price of competitor's good $= 800$}$ $\text {$\mathrm { I } =$ average monthly income $= 4,000$}$ -How is the R² value calculated,and what information does this give you?

Accepted Answer

The answer of \(\text {The following questions refer to this...

Question 20

An explanatory forecasting technique in which the analyst must select independent variables that help determine the dependent variable is called
A)exponential smoothing.
B)regression analysis.
C)trend analysis.
D)moving average method.

Accepted Answer

Regression analysis involves selecting independent variables that have a statistically significant relationship with the dependent variable in order to create a forecast. This technique is commonly used in financial and economic analysis to develop predictive models. Exponential smoothing and moving average are both methods of time series forecasting that do not involve selecting independent variables. Trend analysis involves identifying patterns and trends in historical data but does not require selecting independent variables either.

Quiz 5: Demand Estimation and Forecasting Appendices 5A and 5B

Which of the following is a Lagging Economic Indicator?

The forecasting method that involves using an average of past observations to predict the future (if the forecaster feels that the future is a reflection of some average of past results) is the

Which of the following is the exponential trend equation to forecast sales (S) ?

Charting observations on a semi-logarithmic graph will help the analyst to ascertain whether

Among the advantages of the least-squares trend analysis techniques is

The firm is considering changing its price to $900.Predict the quantity demanded at that price,all other things equal and provide a 95% confidence interval on your estimate.(In doing this,explain the value of t-critical you will use in developing your 95% confidence interval.)

How would you evaluate the quality of this equation overall? Do you have any concerns? Explain.

When would you use a one-tailed rather than a two-tailed t-test when checking significance levels?

Quantitative forecasting that projects past data without explaining the reasons for future trends is called

The Delphi method is a

Which of the following is not a drawback of forecasting using the compound growth rate method?

A major problem in projecting with a trend line is that

The Trend Projection approach to forecasting is represented by

When the more recent observations are more relevant to the estimate of the next period than previous observations,the naïve forecasting method to employ is

What is multicollinearity? In general,how would you know if you had a problem with multicollinearity,and how could you correct it?

Among the advantages of the ________ technique of forecasting are ease of calculation,relatively little requirement for analytical skills,and the ability to provide the analyst with information regarding the statistical significance of results and the size of statistical errors.

Which of the following is a Leading Economic Indicator?

An explanatory forecasting technique in which the analyst must select independent variables that help determine the dependent variable is called