1. Go to https://bea.gov. a. Retrieve quarterly annualized data on real U.S. Gross Domestic Product (GDP) and save it in Excel. Provide a picture of the top portion of the spreadsheet. b. Provide a time series plot of the series using EViews. c. Does this series seem to be coming from a stationary stochastic process? Why or why not? d. Using EViews, plot the first difference of natural logarithm of real U.S. GDP multiplied by 100. What does this new variable mean? e. What are the last two values of U.S. quarterly real GDP and for which dates? What are the corresponding nominal figures? f. When was the highest value of the variable generated in part (d) of this problem and when did that maximum value materialize? When did the variable have its lowest value and what was this lowest value? g. Consider the new series that you have generated in part (d) above. Using only data for the period 1961:quarter 1 – 1980:quarter 4, develop and produce a spread sheet to generate the first three sample autocorrelations of the series. Are these autocorrelations statistically significant? How do you know? What test/s do you use? What are your null and alternative hypotheses? What are your rejection criteria? h. Now use EViews (instead of using a spreadsheet) to answer part (h) above. Produce the relevant Eviews output along with its interpretation to justify your answers. 2. Consider the following forecasting environments. In each case describe the nature of losses from forecast errors. Do you think the loss function is approximately symmetric? a. Suppose you are a weather forecaster at a TV station for your city. You forecast the probability of rain the following day among other things. You know that people hate to be caught up in rain unprepared. You also know that they feel less irritated than in the former situation if they carried an umbrella based on the day’s forecast but the rain never materialized. And, of course, you do care how your viewers feel about your forecasts, because your job and salary depend on viewers’ Page 2 of 2 ratings. b. Your forecast project involves projecting water flows in a river in order to determine the height of the dam that is going to be built. c. A person is trying to project his post retirement expenses. Based on that he will determine how much money from his current earnings he will have to set aside.

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