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6. The GDP of the United States, both in current and real dollars, from 1987 to 2001 was as follows:

Real

Current (2000 chain)

($ In billions)

1987 4,740 6,475

1988 5,104 6,743

1989 5,484 6,981

1990 5,803 7,113

1991 5,996 7,101

1992 6,338 7,337

1993 6,657 7,533

1994 7,072 7,836

1995 7,398 8,032

1996 7,817 8,329

1997 8,304 8,704

1998 8,747 9,067

1999 10,128 9,470

2000 10,487 9,817

2001 11,004 9,891

a. Fit a linear (straight line) trend to each of the data sets

b. Now fit an exponential trend to these data

c. Based on both the linear and exponential trend lines, what would have been your GDP (both current and real) forecast for the years 2002 and 2003?

d. Would any of these trend lines be good predictors of GDP? Why or why not?

1 Answer

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  • 1 decade ago
    Favorite Answer

    Basically, you have to plot the points on a chart. Use the GDP as your Y-axis and the years as your X-axis. The Linear line is a straight line that gets all of the points as close together along the line as possible. It's a better line if there is a constant rate of growth.

    The exponential line will have a slight curve to it. It will also predict a slightly higher GDP for 2002 and 2003 than the straight line did, since there was a significant jump in the GDP between 1999 and 2000.

    The exponential one would have been slightly more accurate, since the gap between one year and the next gradually increased, rather than stay a constant rate.

    Source(s): Worked it out using a chart in Microsoft Excel.
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