Time series are conducive to tracking variables such as revenues, costs, and profits over time. Time series models help evaluate performance, make predictions and forecasts. Consider the following and respond in a minimum of 175 words.

The U.S. has steadily increased the federal debt since2000. Another way to view the federal debt over time is to look at the ratio of federal debt related to the gross domestic product (GDP). Let's see.

A. Time series decomposition seeks to separate the time series (Y) into four components: trend (T), cycle (C), seasonal (S), and irregular (I). What is the difference between these four components? (Refer to LO 14-1).

B. Use the Week 6 Discussion Data (in Resources below). The data gives the ratio of federal debt related to the gross domestic product (GDP) over 21 years.

B1.Construct a Scatter Plot

1. Use the columns t (X) and Federal Debt-GDP (Y)

2. Select data in both columns,t and Federal Debt-GDP

3. Use Insert > X-Y Scatter

4. Finish each chart with x- and y-axis labels.

Do you observe a trend?

If so, what type of trend do you see?

B2. Fit Trend Lines (in the same chart)

1. Create a Linear trendline - What was R2?

2. Create an Exponential trend - What was R2?

3. Create a Polynomial (order 5) - What was R2?

Which model seems to be more appropriate? Why?