Homework 9 Due Thursday, November 10th Forecasting \& Production Begin 1. Data on Real Personal Consumption Expenditures for the US is reported in the following table. a. IF you want to recover this data on your own using the FRED Add-In, once it is installed, type the following in the first four rows of the spreadsheet: Then click on the button in upper right hand corner, "Get FRED Data" Or Simply Use the Data below, also available in an Excel doc on blackboard: ***Unknown future value to be forecast using 4 methods. Y^t=10863.2+491.9Time Note: If you want to estimate this regression, regress PCE=f(time). In Excel, using the Data Analysis tool, you enter "Personal Consumption Expenditures" as the Y-values, and time as the X-values. b. Using the forecasts, compare the accuracy of each of the forecasting methods based on the RMSE criterion in excel. Recall for each type of estimation method: RMSE=n1(YtY^t)2 Use n=10 for this exercise. c. Using your RMSE criterion, which forecast would you have used for 2019? Why is this a logical result for Personal Consumption Expenditures? 2. Savings-Mart (a chain of discount department stores) sells patio and lawn furniture. Sales are seasonal, with higher sales during the spring and summer quarters and lower sales during the fall and winter quarters. The company developed the following quarterly sales forecasting model: FirstQ =1 if observation in First Quarter; 0 otherwise SecondQ =1 for Second Quarter; 0 otherwise Third Q=1 for Third Quarter; 0 otherwise QUESTION: Forecast Savings-Mart's sales of patio and lawn furniture for each quarter of 2002. Hint: You need to figure out what t is in Q1Q4 of 2003. 3. The "Coolest Kicks" Sneakers Company has a fixed production facility in Southern California. Their production function has been estimated by economists to be: Q=300L0.3L2 a. Assume that the Price of the Sneakers =$50, what is the Total Revenue function for the Coolest Kicks Company? b. What is the Marginal Revenue Product of Labor function? c. Assuming that the company must pay its workers $300 per week, what is the profitmaximizing number of workers to hire this week? ** Note: Do Not Forget to Estimate the RMSE for ALL 4 MODELS Homework 9 Due Thursday, November 10th Forecasting \& Production Begin 1. Data on Real Personal Consumption Expenditures for the US is reported in the following table. a. IF you want to recover this data on your own using the FRED Add-In, once it is installed, type the following in the first four rows of the spreadsheet: Then click on the button in upper right hand corner, "Get FRED Data" Or Simply Use the Data below, also available in an Excel doc on blackboard: ***Unknown future value to be forecast using 4 methods. Y^t=10863.2+491.9Time Note: If you want to estimate this regression, regress PCE=f(time). In Excel, using the Data Analysis tool, you enter "Personal Consumption Expenditures" as the Y-values, and time as the X-values. b. Using the forecasts, compare the accuracy of each of the forecasting methods based on the RMSE criterion in excel. Recall for each type of estimation method: RMSE=n1(YtY^t)2 Use n=10 for this exercise. c. Using your RMSE criterion, which forecast would you have used for 2019? Why is this a logical result for Personal Consumption Expenditures? 2. Savings-Mart (a chain of discount department stores) sells patio and lawn furniture. Sales are seasonal, with higher sales during the spring and summer quarters and lower sales during the fall and winter quarters. The company developed the following quarterly sales forecasting model: FirstQ =1 if observation in First Quarter; 0 otherwise SecondQ =1 for Second Quarter; 0 otherwise Third Q=1 for Third Quarter; 0 otherwise QUESTION: Forecast Savings-Mart's sales of patio and lawn furniture for each quarter of 2002. Hint: You need to figure out what t is in Q1Q4 of 2003. 3. The "Coolest Kicks" Sneakers Company has a fixed production facility in Southern California. Their production function has been estimated by economists to be: Q=300L0.3L2 a. Assume that the Price of the Sneakers =$50, what is the Total Revenue function for the Coolest Kicks Company? b. What is the Marginal Revenue Product of Labor function? c. Assuming that the company must pay its workers $300 per week, what is the profitmaximizing number of workers to hire this week? ** Note: Do Not Forget to Estimate the RMSE for ALL 4 MODELS