Reference no: EM131246176

A firm has determined that its average level of sales ( S t ) per week in thousands of dollars during a given year depends on the previous yea r's level of sales ( S t - 1 ), the previous year's level of advertising ( A t - 1 ) per month in thousands of dollars, and the current year's rate of annual industry growth ( G t ) in percentage terms. The firm has also determined that the level of industry growth in the current period depends on the previous period's rate of industry growth ( G t - 1 ) and on current period sales by the firm. During the previous period, the firm's ave rage level of sales was $100 t housand, advertising was $10 thousand , and the rate of growth in the industry was 2 percent. The firm estimated the following two - equation econometric model: S t = 5 + 0.50 S t - 1 + 0.10 A t - 1 + 2 G t and G t = 0.5 G t - 1 + 0.25 S t Combining the two equations yields S t = 10 + S t - 1 + 0.2 0 A t - 1 + 2 G t - 1 Forecast the level of sales in the current period.