The data in CPI-U reflect the annual values of the consumer price index (CPI) in the United States over the 52-year period 1965 through 2016, using 1982 through 1986 as the base period. This index measures the average change in prices over time in a fixed “market basket” of goods and services purchased by all urban consumers, including urban wage earners (i.e., clerical, professional, managerial, and technical workers; self-employed individuals; and short-term workers), unemployed individuals, and retirees.

Soruce: Data extracted from Bureau of Labor Statistics, U.S. Department of Labor, www.bls.gov.)

a. Plot the data.

b. Describe the movement in this time series over the 52-year period.

c. Compute a linear trend forecasting equation and plot the trend line.

d. Compute a quadratic trend forecasting equation and plot the results.

e. Compute an exponential trend forecasting equation and plot the results.

f. Which model is the most appropriate?

g. Using the most appropriate model, forecast the CPI for 2017 and 2018.