Time series are particularly useful to track variables such as revenues, costs, and profits over...

Question

Time series are particularly useful to track variables such as revenues, costs, and profits over time. Time series models help evaluate performance and make predictions. Consider the following and respond in a minimum of 175 words:

Time series decomposition seeks to separate the time series (Y) into 4 components: trend (T), cycle (C), seasonal (S), and irregular (I). What is the difference between these components?
The model can be additive or multiplicative.When we do use an additive model? When do we use a multiplicative model?
The following list gives the gross federal debt(in millions of dollars) for the U.S. every 5 years from 1945 to 2000:

YearGross Federal Debt ($millions)

1945260,123

1950256,853

1955274,366

1960290,525

1965322,318

1970380,921

1975541,925

1980909,050

19851,817,521

19903,206,564

19954,921,005

20005,686,338

Construct a scatter plot with this data. Do you observe a trend? If so, what type of trend do you observe?
Use Excel to fit a linear trend and an exponential trend to the data. Display the models and their respective r^2.
Interpret both models. Which model seems to be more appropriate? Why?

Suraj · Accepted Answer

Time Series Analysis
Time series data: The data collected with respect to time is called time series data.
There are four types of components in time series data. They are listed as follows:
(i) Trend: In this the general tendency of a time series to increase, decrease or stagnate over a long period of time is termed as secular trend. Trend is long term movement in a time series.
(ii) Seasonal: Seasonal variation are fluctuations within a year. Important factors causing seasonal variation are climate and weather conditions.
(iii) Cyclic: Cyclic variation in a time series describe the medium-term changes in the series caused by circumstances which repeat in cycles.
(iv) Irregular:

Time series are particularly useful to track variables such as revenues, costs, and profits over time. Time series models help evaluate performance and make predictions. Consider the following and...

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