Question

Which of the following approaches does multiplicative model have for the component of Time series secular trend (T). Seasonal variations (S), Cyclical (C) and Irregular movement (I) ?
1. T × S × C + I
2. T + S × C × I
3. T × S × C × I
4. T × S + C × I

Answer 1

Correct Answer - Option 3 : T × S × C × I

Explanation

Multiplicative model assumes  that the observed value is obtained by multiplying the Trend(T) by the rates of three other components

Y = T × S × C × I

where as

Y = Original data

T = Trend

S = Seasonal variation

C = Cyclical variation

I = Irregular movement