The growth of a country's Gross Domestic Product (GDP) refers to the strength of the economy. Long-term interest rates, on the other hand, reflect the outlook for inflation in the future. It is said that the economic growth often fuels inflation or inflationary expectations. Given below are the Canadian long-term interest rates and Canadian GDP growth rates (as percentages) for some recent years. Determine the equation of the regression line to predict the long-term interest rates from the GDP growth. Compute the standard error of the estimate for this model. Compute the value of r². Does GDP growth appear to be a good predictor of the long-term interest rate? Why or why not?

Year	Long-Term Interest Rates (%)	Real GDP Growth (%)
2002	5.29	2.8
2003	4.81	1.9
2004	4.58	3.1
2005	4.07	3.2
2006	4.21	2.6
2007	4.27	2.0
2008	3.61	1.2
2009	3.23	-2.7
2010	3.24	3.4
2011	2.78	3.0
2012	1.87	1.9
2013	2.26	2.0
2014	2.23	2.4

* (Do not round the intermediate values. Round your answer to 3 decimal places, e.g. 0.757.) ** (Do not round the intermediate values. Round your answers to 4 decimal places, e.g. 0.7589.)

1. Equation of the regression line: Long term interest rate =___________** + __________(Real GDP Growth) **

2. Standard error of the model =____________**

3. r²=______________*

4. Real GDP is not a good predictort/a good predictort of the Long-term Interest Rate because only 2.6% of the variation in Long-term Interest Rates can be explained by the variation in Real GDP Growth.