The following table shows gasoline sales in the United States (in millions of barrels) from the first quarter

of 1986 to the last quarter of 1989.

GASOLINE SALES IN THE UNITED STATES: 1986:1 TO 1989:4

(IN MILLIONS OF BARRELS)

Year Sales Year Sales Year Sales Year Sales

1986.1 600.4 1987.1 610.8 1988.1 640.8 1989.1 639.3

1986.2 652.8 1987.2 679.5 1988.2 686.5 1989.2 681.0

1986.3 671.1 1987.3 681.2 1988.3 691.1 1989.3 685.5

1986.4 654.8 1987.4 667.6 1988.4 676.5 1989.4 677.7

Source: Survey of Current Business (Washington, D.C.: Government Printing Office), various issues.

i.Estimate the linear trend in the data, and use it to forecast gasoline sales in the United States in each quarter of 1990.

ii.Estimate the log-linear trend in the data, and use it to forecast gasoline sales in the United States in each quarter of 1990.

iii.Which form of the trend fits the historical data better? Why would we expect both forecasts to be rather poor?

(6 marks)