According to the Census Bureau, the number of people below the poverty level has been steadily increasing (CNN, September 16, 2010). This means many families are finding themselves there for the first time. The following table shows a portion of the percent of families in the United States who are below the poverty level from 1986-2009.

Year............. Poverty Rate

1986....................... 10.9

1987....................... 10.7

⋮........................................... ⋮

2009....................... 11.1

a. Plot the series and comment on its shape.

b. Use a 3-period moving average to make in-sample forecasts. Compute the resulting MSE and MAD.

c. Use the exponential smoothing method to make in-sample forecasts with α = 0.6. Compute the resulting MSE and MAD.

d. Choose the appropriate model to make a forecast of the poverty rate in 2010.