The plots to the left and right show exponentially weighted moving averages (EWM

Question

The plots to the left and right show exponentially weighted moving averages (EWMA) of the percentage change of a country's gross national product (GNP). The time series is quarterly for a five-year period_ To the left the weight w in the EWMA is 0.3, and w = 0.8 to the right. 20 The EWMA in both cases is shown as a line and the surrounding data as dots. Complete parts a through c below The EWMA with w = 0.8 is better because it captures less random variation. (b) In the most recent quarter (the last data point in this series), the GYP was estimated to be $11.801 billion. What would you forecast, having seen these plots, for GNP for the next quarter? The GNP for the next quarter should be about $ (Round to three decimal places as needed.)

Explanation / Answer

As w=0.8 is more reliable we consider the right graph for prediction.

The graph shows a tendency to increase for the next quarter.

Hence estimate for the next quarter = 2.48 (approxly)

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