Use the Naïve forecasting method and the Marginal Propensity to Consume (calculated in Question 6) to calculate Forecasts using the steps below: Label Column E, “Forecast”. Type the formula “=0.06*C2” in Cell E4 – in other words, the forecast for Sales is equal to the value of the leading indicator (Income) two periods ago, scaled by 0.06 (the Marginal Propensity to Consume) because in Question 6 we calculated that consumers spend approximately 6% (0.06) of their income on our product. What is the value of E4 rounded to 2 decimal places?

Practice More Questions From: Week 1 Assessment

Q:

Highlight cells B1:C31 and then click on 2-D Line Chart. Why is it difficult to identify the relationship between the two variables?

Q:

Click into the chart in Question 2. Click on Change Chart Type.Select Combo.Within Combo, change both Chart Types to Line.For Sales, select Secondary Axis.

Q:

For the given data set, when is the highest peak for Income?

Q:

On average, how many periods lead does the leading indicator have over the target time series?

Q:

Create a new column in D labelled as “Marginal Propensity to Consume”. Type the following formula in cell D2 “=B2/C2” and fill down for the entire column (i.e. Column D’s values are equal to Sales divided by Income.Calculate the average of column D.What is your result to 2 decimal places?

Q:

Use the Naïve forecasting method and the Marginal Propensity to Consume (calculated in Question 6) to calculate Forecasts using the steps below: Label Column E, “Forecast”.Type the formula “=0.06*C2” in Cell E4 – in other words, the forecast for Sales is equal to the value of the leading indicator (Income) two periods ago, scaled by 0.06 (the Marginal Propensity to Consume) because in Question 6 we calculated that consumers spend approximately 6% (0.06) of their income on our product.What is the value of E4 rounded to 2 decimal places?

Q:

Plot Sales and Forecast on the same pair of axes as a line chart. What do you notice?

Q:

Now look at the sheet OECD_CLI for Questions 9 and 10. Plot the Composite Leading Indicator for “Euro Area (19 countries)”.When does the economic expansion begin for this region?

Q:

Suppose we have a business that operated in the region noted in Question 9. Our sales data has been fairly level right until April 2020. Based on looking at this data alone – we forecast this sales pattern to continue into the future – remaining level.By observing the Composite Leading Indicator (CLI), how might we adjust our Sales Forecast?

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