Consumer Price Index. The Consumer Price Index (CPI) measures the increase (or decrease) in the prices of goods and services relative to a base year. The CPI for the years 1990–2008 (using 1984 as a...

Consumer Price Index. The Consumer Price Index (CPI) measures the increase (or decrease) in the prices of goods and services relative to a base year. The CPI for the years 1990–2008 (using 1984 as a base period) is shown in the table on p. 536.

(a) Graph the time series. Do you detect a longterm trend?

(b) Calculate and plot a 5-point moving average for the CPI. Use the moving average to forecast the CPI in 2011.

(c) 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 2011.

(d) Use the Holt–Winters forecasting model with trend to forecast the CPI in 2011. Use smoothing constants w = .4 and v = .5.