When using extrapolation to forecast,
A)a time series of past observations is used.
B)there is a large error term in the results.
C)predictions can only be made about the future.
D)dummy variables can skew the results.

Question

Quizplus · Accepted Answer

Extrapolation uses past observations in a time series to forecast future values, so choice A is correct. Choice B is not necessarily true, as the size of the error term will depend on how well the past observations can predict future values. Choice C is obvious and doesn't provide any insight about the use of extrapolation. Choice D does not relate to the use of extrapolation, so it is not correct.

When Using Extrapolation to Forecast