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Dear John,
I have a question to ask about forecasting. It’s from BPP revision kit Q14.13
Unemployment numbers actually recorded in a town for the second quarter of the year 2000 were 4,700. The underlying trend at this point was 4,300 people and the seasonal factor is 0.92. Using the multiplicative model for seasonal adjustment, what is the seasonally-adjusted figure (in whole numbers) for the quarter?
A- 3,932
B- 3,956
C- 5,068
D- 5,109Ans : D
Actually I don’t understand why 4,700 is divided by 0.92, because I thought 4,700 should be multiplied by 0.92. Could you please help me explain this?
Thank you 🙂
If you were forecasting you would indeed take the trend and multiply by 0.92.
Here, however, we are not forecasting – we are calculating what the number would be if there was no seasonality.
If the number without seasonality was X, then the actual figure would be X x 0.92. Since the know the actual figure is 4,700, then X = 4,700 / 0.92
Thank you dear John for your answer.
As far as I understood and in accordance to your answer , in fact in this case the actual number is 4,700 and the seasonal variation is 0.92 and the question is asking us to calculate the TREND which is 4,700 / 0.92. Perfect!But now my question is what on earth is 4,300 ?!!!! The questions is calling it the UNDERLYING TREND! I am confused about this number! What is it?!!
Thank you
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