The following time-series plot shows the annual unemployment rate in blue and th

Question

The following time-series plot shows the annual unemployment rate in blue and the annual inflation rate in red over a period of 19 years. Complete parts (a) through (d) below. (a) Estimate the unemployment and inflation rates for year 5. The unemployment rate in year 5 was approximately 7.5% (Type an integer or decimal rounded to one decimal place as needed.) The inflation rate in year 5 was approximately 3% (Type an integer or decimal rounded to one decimal place as needed.) (b) Estimate the unemployment and inflation rates for year 19. The unemployment rate in year 19 was approximately % (Type an integer or decimal rounded to one decimal place as needed.) The inflation rate in year 19 was approximately % (c) The misery index is defined as the sum of the unemployment rate and the inflation rate. Use your results from (a) and (b) to estimate the misery index for years 5 and 19. The misery index for year 5 was approximately %. (Type an integer or decimal rounded to one decimal place as needed.) The misery index for year 19 was approximately %. (Type an integer or decimal rounded to one decimal place as needed.) (d) Describe any relationship that might exist between the unemployment rate and inflation rate over the time period shown. Choose the correct answer below. A. There seems to be no relationship at any time between the unemployment rate and the inflation rate. B. An increase in the inflation rate seems often to be followed by an increase in the unemployment rate. Likewise, a decrease in the inflation rate seems often to be followed by a decrease in the unemployment rate. C. An increase in the inflation rate seems often to be followed by a decrease in the unemployment rate. Likewise, a decrease in the inflation rate seems often to be followed by an increase in the unemployment rate. D. The inflation rate and the unemployment rate seem to increase and decrease at the same time.

Explanation / Answer

b) The unemployment rate in year 19 was approximately 4.8%
The inflation rate in year 19 was approximately 3.2%

Note: The graph is too small and can be better approximated with an enlarged version.

c) The misery index for year 5 was approximately 7.5 + 3 = 10.5%
The misery index for year 19 was approimately 3.2 + 4.8 = 8%

d) There seems to be no relationship at any time between the unemplyment rate and the inflation rate. (There are no consistent patterns found)

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