Statement of a problem № m1069


The management of Ingalls Super Discount stores, with several stores in the Oklahoma City area, wants to construct an index of economic activity for the metropolitan area. Management contends that, if the index reveals that the economy is slowing down, inventory should be kept at a low level. Three series seem to hold promise as predictors of economic activity—area retail sales, bank deposits, and employment. All of these data can be secured monthly from the U.S. government. Retail sales is to be weighted 40%, bank deposits 35%, and employment 25%. Seasonally adjusted data for the first 3 months of the year are:  Construct an index of economic activity for each of the 3 months, using January as the baseperiod.

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