Chapter 14.5, Problem 14.27ACB

Consumer Price Index. The CPI measures the increase (or decrease) in the prices of goods and services relative to a base year. The CPI for the years 1990-2015 (using 1984 as a base period) is shown in the table below.

a. Graph the time series. Do you detect a long-term trend?

b. Calculate and plot the exponentially smoothed series for the CPI using a smoothing constant of w = .4. Use the exponentially smoothed values to forecast the CPI in 2015.

c. Use Holt’s forecasting model with trend to forecast the CPI in 2015. Use smoothing constants w = .4 and v = .5. 242.64