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The U.S. monthly inflation rate for 2016 is shown below: a. Compute the inflation rate for January 2017 using the exponential smoothing forecast using

`a=0.1`

and then using 0.4 . Assume that the forecast for January 2016 is 1.4 . Do not round intermediate calculations. Round your answers to three decimal places. Forecast (January 2017,

`a=0.1`

)

`%`

Forecast (January 2017,

`a=0.4`

): % b. What is the MAD for the forecasts generated using exponential smoothing method? Use only the months from March to December. Do not round intermediate calculations. Round your answers to three decimal places.

```
MAD (a=0.1):,3 p.p.
MAD (a=0.4): p.p.
```

Which method is better? The exponential smoothing with a smoothing constant of is better because it provides a MAD.