U.S. retail trade industry

Average hourly earnings in the U.S. retail trade industry (in current dollars and constant dollars) are shown in the table.

Year 1990 1995 2000 2002 2003
Current dollars 4.88 5.94 6.75 7.13 7.29
Constant dollars 5.70 5.39 5.07 5.00 4.97

a. Define the terms current dollars and constant dollars. You will have to look these terms up

b. Find the least squares regression line that approximates the average hourly earnings in both current dollars and constant dollars for this industry. Find the correlation coefficient in both cases. Comment on the meanings of the correlation coefficients.

c. Find where the two regression lines that you obtained in part b intersect. What does this point mean?

d. What are the slopes of the regression lines? What do they mean? (Use correct units.) What does this say about the long-term prospects of retail trade industry employees?

e. Use the regression lines to estimate the difference in current dollar and constant dollar hourly earnings in the year 2005.

f. Graph both of the regression lines on the same set of axes.

g. If you were a union negotiator for employees in the retail trade industry, how would you use this information?

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