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

question 8

Multiple Choice

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.

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