Consider the following linear trend models estimated from 10 years of quarterly data with and without seasonal dummy variables d₁, d₂, and d₃. Here, d₁ = 1 for quarter 1, 0 otherwise; other dummy variables are defined similarly.

Model 1: ŷ = 62.00 + 0.49t

Model 2: ŷ = 62.00 + 0.69t − 0.36d₁ − 0.43d₂ − 0.12d₃

Use each model to make a forecast for y for the first and the fourth quarters of the 11th year.

Use each model to make a forecast for y for the first and the fourth quarters of the 11th year.

Note: Round your answers to 2 decimal places.

Which is the preferred model for forecasting if, relative to Model 1, Model 2 has higher R² but lower adjusted R²?