Chapter 2

Question 1

What are the problems with forecasting?

Answer 1

• the less historic data, the less reliable the results
• the further into the future we forecast, the less reliable the results
• There is an assumption that the trend and seasonal variation will continue indefinitely
• Cyclical and random variations are ignored

Question 2

What is an index?

Answer 2

A measure in changes in price over time

Question 3

Old index for measuring inflation

Answer 3

Retail Price Index

Question 4

New index for measuring inflation

Answer 4

Consumer Price Index