Question

3.) Having a reliable forecast of national economic growth can be important in making investment decisions. The columns Month, Actualgrowth, Forecast1, Forecast2 and Forecast3 in the associated SPSS file contain actual economic figures over a 24-month period as well as the forecasted growth figures using three separate forecasting techniques. Which of the three forecasting techniques seems to be the best?

Month | Actual Growth | Forecast 1 | Forecast 2 | Forecast 3

1   .023   .008   .018   .017
2   .011   .007   .015   .010
3   .025   .012   .029   .023
4   .005   .010   -.004   .004
5   .018   .006   .005   .014
6   .023   .027   .009   .024
7   .015   .013   .002   .015
8   .035   .027   -.004   .031
9   .022   .021   .006   .018
10   .008   .015   .000   .007
11   .038   .031   -.013   .035
12   .050   .022   .021   .044
13   .020   .020   .017   .018
14   .019   .021   .012   .017
15   .006   .007   .009   .005
16   .016   .011   .017   .016
17   .007   .014   .016   .010
18   .012   .004   .011   .014
19   .027   .015   .005   .023
20   .019   .025   .009   .018
21   .012   .010   .028   .011
22   .029   .008   -.001   .025
23   .022   .012   .023   .018
24   .025   .022   .017   .023

Answer 1

Forecasting is a method of making predictions of the future based on historic data.

The forecast that is closer to actual data will be more accurate. The lesser the difference

From the data given in the question, the data has been entered in excel and calculations done.

As the difference is very less for Forecast 3, Forecast 3 forecasting method seems to be best.

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