Hiroshi Sato, an owner of a sushi restaurant in San Francisco, has been following an aggressive marketing campaign to thwart the effect of rising unemployment rates on business. He used monthly data on sales ($1,000s), advertising costs ($), and the unemployment rate (%) from January 2008 to May 2009 to estimate the following sample regression equation:

− 0.69Unemployment Ratet−1.
a. Hiroshi had budgeted $620 toward advertising costs in May 2009. Make a forecast for Sales for June 2009 if the unemployment rate in May 2009 was 9.1%.
b. What will be the forecast if he raises his advertisement budget to $700?
c. Reevaluate the above forecasts if the unemployment rate was 9.5% in May 2009.

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Sales 17.510.03Advertising Costst-i