Plot the quarterly output and its trend values. Identify the number of times the trend curve intersects the output curve
Explanation:
There are 12 values of Output and Trend. When you consider the first value of both i.e. 56 and 60.38, you observe that the Trend is greater than the Output. Since the Trend is greater, they will not intersect till the time the Trend remains above the Output. As soon as the Trend drops below the Output, they will intersect. They will intersect next when the Trend again becomes greater than the Output.
This is mathematically equivalent to calculating Trend − Output and finding the number of times the sign changes for this difference as shown below.
Thus, the curves intersect each other 6 times (shown in red).
Hence, option (b).
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