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Below are data for U.S. DPI and PCE on two major components of consumer spending, motor vehicles and parts and housing and utilities. One is a durable good and the other is comprised of housing and other services and non-durables, such as natural gas purchases. Using scatter diagrams and trendlines, generate graphs showing the relationship of each of the consumption categories to DPI and find the equation of the graph and the R squared. Use your results to answer the questions to the right

Questions:

a) Plot the data using a scatterplot.

b) Find the equation that shows the relationship between motor vehicles and parts expenditure (PCE) and DPI (insert a linear trendline and show the equation on the scatterplot).

c) Find the equation that shows the relationship between housing and utilities expenditures (PCE) and DPI (insert a linear trendline and show the equation on the scatterplot).

d) What are the R squares for the equations? Which one is better? Can you provide an economic rationale to explain the difference?

e) Use the equations to calculate estimated values for both types of expenditures for 2011 and 2012. How well did the equations predict values for 2011 and 2012?

f) If DPI increases at a rate of 2.2% in 2013 and then at a rate of 2.6% in 2014, what are the predicted values for consumer spending on motor vehicles and parts? On housing and utilities?

Year DPI Motor Vehicles and Parts
1964 462,3 25,8
1965 497,8 29,6
1966 537,4 29,9
1967 575,1 29,6
1968 624,7 35,4
1969 673,8 37,4
1970 735,5 34,5
1971 801,4 43,2
1972 869,0 49,4
1973 978,1 54,4
1974 1 071,7 48,2
1975 1 187,3 52,6
1976 1 302,3 68,2
1977 1 435,0 79,8
1978 1 607,3 89,2
1979 1 790,9 90,2
1980 2 002,7 84,4
1981 2 237,1 93,0
1982 2 412,7 100,0
1983 2 599,8 122,9
1984 2 891,5 147,2
1985 3 079,3 170,1
1986 3 258,8 187,5
1987 3 435,3 188,2
1988 3 726,3 202,2
1989 3 991,4 207,8
1990 4 254,0 205,1
1991 4 444,9 185,7
1992.  4 736,7 204,8
1993 4 921,6 224,7
1994 5 184,3 249,8
1995 5 457,0 255,7
1996 5 759,6 273,5
1997 6 074,6 293,1
1998 6 498,9 320,2
1999 6 803,3 350,7
2000 7 327,2 363,2
2001 7 648,5 383,3
2002 8 009,7 401,3
2003 8 377,8 401,0
2004 8 889,4 403,9
2005 9 277,3 408,2
2006 9 915,7 394,8
2007 10 423,6 399,9
2008 11 024,5 339,3
2009 10 722,4 316,0
2010 11 127,1 342,7
2011 11 549,3 373,6
2012 p. 11 931,2 407,0



Year DPI Housing and Utilities
1964 462,3 72,1
1965 497,8 76,6
1966 537,4 81,2
1967 575,1 86,3
1968 624,7 92,7
1969 673,8 101,0
1970 735,5 109,4
1971 801,4 120,0
1972 869,0 131,2
1973 978,1 143,5
1974 1 071,7 158,6
1975 1 187,3 176,5
1976 1 302,3 194,7
1977 1 435,0 217,8
1978 1 607,3 244,3
1979 1 790,9 273,4
1980 2 002,7 311,8
1981 2 237,1 352,0
1982 2 412,7 387,0
1983 2 599,8 421,2
1984 2 891,5 458,3
1985 3 079,3 500,7
1986 3 258,8 535,7
1987 3 435,3 571,8
1988 3 726,3 614,5
1989 3 991,4 655,6
1990 4 254,0 696,4
1991 4 444,9 735,5
1992.  4 736,7 771,2
1993 4 921,6 814,5
1994 5 184,3 866,5
1995 5 457,0 913,8
1996 5 759,6 961,2
1997 6 074,6 1 009,9
1998 6 498,9 1 065,2
1999 6 803,3 1 125,0
2000 7 327,2 1 198,6
2001 7 648,5 1 287,7
2002 8 009,7 1 334,8
2003 8 377,8 1 393,9
2004 8 889,4 1 462,4
2005 9 277,3 1 582,6
2006 9 915,7 1 686,2
2007 10 423,6 1 756,2
2008 11 024,5 1 831,0
2009 10 722,4 1 871,6
2010 11 127,1 1 891,9
2011 11 549,3 1 929,9
2012 p. 11 931,2 1 965,9

 

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