Below are data for U.S. DPI and PCE on two major components of consumer spending, motor vehicles

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Question:

Below are data for U.S. DPI and PCE on two major components of consumer spending, motor vehicles and parts and housing and utilities. One is a durable good and the other is comprised of housing and other services and non-durables, such as natural gas purchases. Using scatter diagrams and trendlines, generate graphs showing the relationship of each of the consumption categories to DPI and find the equation of the graph and the R squared. Use your results to answer the questions to the right.

c) B. Find the equation that shows the relationship between housing and utilities expenditures (PCE) and DPI (insert a linear trendline and show the equation on the scatterplot).

d) What are the R squares for the equations? Which one is better? Can you provide an economic rationale to explain the difference?

e) Use the equations to calculate estimated values for both types of expenditures for 2011 and 2012. How well did the equations predict values for 2011 and 2012?

f) If DPI increases at a rate of 2.2% in 2013 and then at a rate of 2.6% in 2014, what are the predicted values for consumer spending on motor vehicles and parts? On housing and utilities?


Year	DPI	Motor Vehicles and Parts
1964.	462	26
1965.	498	30
1966.	537	30
1967.	575	30
1968.	625	35
1969.	674	37
1970.	736	35
1971.	801	43
1972.	869	49
1973.	978	54
1974.	1,072	48
1975.	1,187	53
1976.	1,302	68
1977.	1,435	80
1978.	1,607	89
1979.	1,791	90
1980.	2,003	84
1981.	2,237	93
1982.	2,413	100
1983.	2,600	123
1984.	2,892	147
1985.	3,079	170
1986.	3,259	188
1987.	3,435	188
1988.	3,726	202
1989.	3,991	208
1990.	4,254	205
1991.	4,445	186
1992.	4,737	205
1993.	4,922	225
1994.	5,184	250
1995.	5,457	256
1996.	5,760	274
1997.	6,075	293
1998.	6,499	320
1999.	6,803	351
2000.	7,327	363
2001.	7,649	383
2002.	8,010	401
2003.	8,378	401
2004.	8,889	404
2005.	9,277	408
2006.	9,916	395
2007.	10,424	400
2008.	11,025	339
2009.	10,722	316
2010.	11,127	343
2011.	11,549	374
2012 ^p.	11,931	407

Year	DPI	Housing and Utilities
1964.	462	72
1965.	498	77
1966.	537	81
1967.	575	86