The growth of a country’s Gross Domestic Product (GDP) reflects the strength of the economy. Long-term interest rates, on the other hand, reflect the outlook for inflation in the future. It is said that economic growth often fuels inflation or inflationary expectations. Given here are the Canadian long-term interest rates and Canadian GDP growth rates (as percentages) for some recent years. Determine the equation of the regression line to predict the long-term interest rates from the GDP growth. Compute the standard error of the estimate for this model. Compute the value of r². Does GDP growth appear to be a good predictor of the long-term interest rate? Why or why not?

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Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Long-Term Interest Rates (%) 5.29 4.81 4.58 4.07 4.21 4.27 3.61 3.23 3.24 2.78 1.87 2.26 2.23 Real GDP Growth (%) 2.8 1.9 3.1 3.2 2.6 2.0 1.2 -2.7 3.4 3.0 1.9 2.0 2.4