Suppose that you work for a U.S. senator who is contemplating writing a bill that would put a national sales tax in place. Because the tax would be levied on the sales revenue of retail stores, the senator has asked you to prepare a forecast of retail store sales for year 8, based on data from year I through year 7. The data are:
Year Retail Store Sales
1…………………….$1,225
2. …………………….1,285
3………………………1,359
4………………………1,392
5………………………1,443
6………………………1,474
7………………………1,467
a. Use the first naive forecasting model presented in this chapter to prepare a forecast of retail store sales for each year from 2 through 8.
b. Prepare a time-series graph of the actual and forecast values of retail store sales for the entire period. (You will not have a forecast for year 1 or an actual value for year 8.)
c. Calculate the root-mean-squared error for your forecast series using the values for year 2 through year 7.