Number Year Gross Income Price Index Adjusted Price Index Real Income 1 1991 50,599 136.2 1.362...

Number	Year	Gross Income	Price Index	Adjusted Price Index	Real Income
1	1991	50,599	136.2	1.362	37150.51
2	1992	53,109	140.3	1.403	37853.88
3	1993	53,301	144.5	1.445	36886.51
4	1994	56,885	148.2	1.482	38383.94
5	1995	56,745	152.4	1.524	37234.25
6	1996	60,493	156.9	1.569	38555.13
7	1997	61,978	160.5	1.605	38615.58
8	1998	61,631	163.0	1.630	37810.43
9	1999	63,297	166.6	1.666	37993.40
10	2000	66,531	172.2	1.722	38635.89
11	2001	67,600	177.1	1.771	38170.53
12	2002	66,889	179.9	1.799	37181.21
13	2003	70,024	184.0	1.840	38056.52
14	2004	70,056	188.9	1.889	37086.29
15	2005	71,857	195.3	1.953	36793.14

The data from Exhibit 3 is also in the Excel file income.xls on the course website. Use Excel, along with this file, to determine Mrs. Bella’s real income for the last fifteen years. Do this by first converting each price index from percent by dividing by 100. Then, divide gross income by your converted (adjusted) price index. Using Excel, find the mean, median, standard deviation, and variance of her past real income. Explain the meaning of these statistics. Can you use mean income to forecast future earnings? Take into account both statistical and non-statistical considerations.

Expert Solution

On the basis of the information given in the table, Mrs Bella's real income is calculated in the last column of the following table by calculating adjusted price index. And then mean , median , variance and S. D. is calculated on the basis of her past real income

(i) Mrs. Bella's average real income in past 15 years is 37760.48

(ii) Real income which divide the real income set in to two equal part is median value =37810.43

(iii) Amount of deviation of the real income of Mrs. Bella from mean value is S.D.=653.43

milcah answered 3 months ago

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