Exercises 

1. Explain the similarity between how time-series decomposition and Winters' exponential smoothing deal with seasonality.

2. Discuss the trend, the seasonal, and the cyclical components.

3. What is the difference between seasonal factors and seasonal indices?

4. How is the long-term trend determined for a time-series decomposition model?

5. How do true cycles and the cycles typically found in business data differ?

6. Using your own words, write a description of each of the four components of the classic time-series decomposition technique. Avoid using mathematical relationships and technical jargon as much as possible so that your explanations can be understood by almost anyone.

7. Suppose that sales of a household appliance are reported to be 13,000 units during the first quarter of the year. The seasonal index for the first quarter is 1.24. Use this information to make a forecast of sales for the entire year. Actual sales for the year were 42,000 units. Calculate your percentage error for the year. What percentage error would result if you forecast sales for the year by simply multiplying the 13,000 units for the first quarter by 4?