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CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series

Which component of a time series is best illustrated by a sharp fall in a company's production caused by an unexpected flood?

It is irregular variation. A flood is an unpredictable, non-recurring event that causes a sudden disturbance, whereas trend, seasonal and cyclical movements follow long-term or regular recurring patterns.

  1. ASecular trend
  2. BSeasonal variation
  3. CIrregular variationCorrect
  4. DCyclical variation

Explanation

Floods are unforeseeable, non-recurring events, which produce irregular (random) variation. Seasonal variation recurs within a year at regular intervals, and cyclical variation spans several years, so neither fits a one-off shock.

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