TABLE 16-12 A Local Store Developed a Multiplicative Time-Series Model to Forecast

question 126

Multiple Choice

TABLE 16-12
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 2005 to 2009. The following is the resulting regression equation:
log₁₀ = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
where is the estimated number of contracts in a quarter.
X is the coded quarterly value with X = 0 in the first quarter of 2005.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Table 16-12, the estimated quarterly compound growth rate in revenues is around

• A) 1.2%.
• B) 2.8%.
• C) 12%.
• D) 28%.

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Definitions:

Production Possibilities Schedule

A graphical representation that shows the different combinations of two goods or services that can be produced within a given time period, provided that available resources and technology are static.

Consumer Goods

Goods that are produced for direct consumption by the end user.

Capital Goods

Long-term assets purchased by businesses to produce goods and services.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources), assuming all resources are fully utilized.