Dick Staples, has mentioned to Barbara Lynch that he has found both the unemployment rate and the level of income to be useful predictors.

a. Suppose that Ms. Lynch provides you with the following unemployment data for the northern region she is concerned with: 

b. Using Excel, plot a scatter gram of SALES versus northern-region unemployment rate (NRUR). Does there appear to be a relationship? Explain.

c. Prepare a bivariate regression model of sales as a function of NRUR in the following form:

d. Write a memo to Ms. Lynch in which you evaluate these results and indicate how well you think this model would work in forecasting her sales series.

e. Use the model to make a forecast of sales for each quarter of 2017, given the forecast for unemployment (FNRUR) that HeathCo has purchased from a macroeconomic consulting firm (MacroCast):

f. For the actual sales given in Exercise 11(c), calculate the MAPE for this model. How does it compare with what you found in Exercise 11(c)?

g. Barbara Lynch also has data on income (INC), in billions of dollars, for the region as follows:

Year	Q1	Q2	Q3	Q4
2008	318	359	404	436
2009	475	534	574	622
2010	667	702	753	796
2011	858	870	934	1,010
2012	1,066	1,096	1,162	1,187
2013	1,207	1,242	1,279	1,318
2014	1,346	1,395	1,443	1,528
2015	1,613	1,646	1,694	1,730
2016	1,755	1,842	1,832	1,882

Using Excel, plot a scattergram of SALES with INC. Does there appear to be a relationship? Explain.

h. Prepare a bivariate regression model of SALES as a function of income (INC) and write your results in the equation:

i. Write a memo to Ms. Lynch in which you explain and evaluate this model, indicating how well you think it would work in forecasting sales.

j. HeathCo has also purchased a forecast of income from MacroCast. Use the following income forecast (INCF) to make your own forecast of SALES for 2017:

k. On the basis of the actual sales given in Exercise 11(c), calculate the MAPE for this model. How does it compare with the other two models you have used to forecast sales?

l. Prepare a time-series plot with actual sales for 2007Q1 through 2016Q4 along with the sales forecast you found in part (j) of this exercise. To accompany this plot, write a brief memo to Ms. Lynch in which you comment on the strengths and weaknesses of the forecasting model.