A the Seasonally Adjusted US Quarterly Industrial Production Index from the First

question 135

Essay

a. The seasonally adjusted US quarterly Industrial Production Index from the first quarter of 2001 to the fourth quarter of 2005 (y_t, 2002 = 100) is shown in the table below. Would the linear or quadratic model fit better? $\begin{array}{|rl|}\hline\text { Time period } & y_{t} \\\hline \text { Mar-01 } & 136.7 \\\text { Jun-01 } & 124.1 \\\text { Sep-01 } & 120.5 \\\text { Dec-01 } & 117.4\\\text { Mar-02 } & 101.1 \\\text { Jun-02 } & 102.5 \\\text { Sep-02 } & 98.5 \\\text { Dec-02 } & 97.9 \\\text { Mar-03 } & 94.0 \\\text { Jun-03 } & 86.7 \\\text { Sep-03 } & 89.8\\\text { Dec-03 } & 92.3 \\\text { Mar-04 } & 95.9 \\\text { Jun-04 } & 89.6 \\\text { Sep-04 } & 86.3 \\\text { Dec-04 } & 84.5 \\\text { Mar-05 } & 88.7 \\\text { Jun-05 } & 109.9 \\\text { Sep-05 } & 100.9 \\\text { Dec-05 } & 108.4\\\hline\end{array}$ b. Use Excel and the regression technique to calculate the linear trend line and the quadratic trend line. Which model fits better?

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