Transcribed image text: 1. The Canadian unemployment rate as a percentage of the civilian labor force (seasonally adjusted) between 1974 and the third quarter of 1975 is shown below: Quarter Unemployment rate Year 1974 1 5.4 2 5.3 3 5.3 4 5.6 1975 1 6.9 2 7.2 3 7.2 a. Estimate the unemployment rates in the fourth quarter of 1975 and the first quarter of 1976 using a 3-period moving average. 2. A simple exponential smoothing forecast (using a =0.7 as the smoothing factor) is ran for the above data. The resulting one-period ahead forecast is reported in the following table. Quarter Unemployment rate Forecast (α =0.7) Year 1974 1 5.4 2 5.3 5.4 3 5.3 5.33 4 5.6 5.31 1975 1 6.9 5.51 2 7.2 6.48 3 7.2 6.99 b. Estimate the unemployment rates in the fourth quarter of 1975 and the first quarter of 1976 using the above method (exponential smoothing forecast with a =0.7). c. Compare the accuracy of the above forecasts (3-period moving average and exponential smoothing with a =0.7) using Mean Absolute Deviation and Mean Squared Deviation criteria. Which method would you suggest based on these criteria? Would you recommend changing the parameters of the selected method (explain why or why not)?
