CPI 2017. The most common use of the Consumer Price Index (CPI) is as an economic indicator to forecast inf lation and evaluate the effectiveness of government policies. Following is the time series plot for the monthly CPI (not seasonally adjusted) from January 2007 to December 2017. The linear trend line is: CPI =

207.2 + 0.304 t, where t = 0, 1, c131 to represent the months in the series.

a) What does the intercept 207 represent in this trend line? What does the slope represent?

b) Is this model appropriate for this series? Explain.

c) A regression model fit to the same data from 2009 on has the equation of 207.3 + 0.305t. Which model would you prefer to use to predict the CPI for June 2018? Explain.