a) The figure below shows a time plot of the seasonally adjusted pre-September-11 AIR series. Which of the following methods would be adequate for forecasting the series shown in the figure?

Linear regression model seasonality

Linear regression model with trend

Linear regression model with trend and seasonality

b) Specify a linear regression model for the AIR series that would produce a seasonally adjusted series similar to the one shown in Figure above (part a), with multiplicative seasonality. What is the outcome variable? What are the predictors?

Seasonally Adjusted Air Revenue Passenger Miles ($billions) Jan-90 Jan-91 Jan-92 Seasonally adjusted pre-September 11 Air Series Jan-93 Jan-94 Jan-95 Month Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Seasonally Adjusted Air Revenue Passenger Miles ($billions) Jan-90 Jan-91 Jan-92 Seasonally adjusted pre-September 11 Air Series Jan-93 Jan-94 Jan-95 Month Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01