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5.6 Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2You have seen that the relationship between inflation and unemployment is not very strong. If we are interested in predicting

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Answer #1

(a) &(b)

year X (L1) Inflation Y(L2) Unemployment 1981 8.9 9.7 1982 3.8 9.6 1983 3.8 7.5 1984 3.9 7.2 1985 3.8 7 1986 1.1 1987 4.4 5.5

(f)

SUMMARY OUTPUT Regression Statistics Multiple R 0.56140354 R Square 0.315173935 Adjusted R Square 0.287780893 Standard Error

The leastsquare line for predicting next year's unemployment fro this year's inflation
Y=4.2488+0.5174x(inflation).

(g) Predict next year's unemployment if this years's inflation is 6%
Sol:Y=4.2488+0.5174x(inflation).

     Y=4.2488+0.5174*0.06

   Y=4.279

year X (L1) Inflation Y(L2) Unemployment 1981 8.9 9.7 1982 3.8 9.6 1983 3.8 7.5 1984 3.9 7.2 1985 3.8 7 1986 1.1 1987 4.4 5.5 1988 4.4 5.3 1989 4.6 5.6 1990 6.1 5. 5. & 8 5 1991 8.1 2.9 6.9 1992 1993 2.7 6.1 5.6 1994 2.7 5 2.5 5.4 1995 1996 3.3 4.9 1.7 1997 1998 4.5 4.2 1.6 1999 2.7 4 2000 3.4 4.7 2001 1.6 5.8 2002 2.4 6 2003 1.9 5.5 2004 3.3 5.1 2005 4.6 3.4 2.5 2006 4.6 2007 4.1 5.8 2008

SUMMARY OUTPUT Regression Statistics Multiple R 0.56140354 R Square 0.315173935 Adjusted R Square 0.287780893 Standard Error 1.215716352 Observations 27 ANOVA df Significance F 0.002312462 1 Regression Residual Total SS MS F 17.00491785 17.00492 11.50562 36.94915623 1.477966 53.95407407 25 26 Coefficients Standard Error t Stat P-value 4.248816106 0.562835142 7.548953 6.66E-08 0.517460984 0.152553649 3.391993 0.002312 Lower 95% Upper 95%ower 95.09pper 95.0% 3.089635441 5.407997 3.089635 5.407997 Intercept X Variable 1 0.203270866 0.831651 0.203271 0.831651

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