With a permanent jump in volume, which forecast climbs the step right away?

• A. Cumulative mean
• B. Weighted mean
• C. Naive forecast
• D. Moving average

Answer: (C)

The key idea is how forecast methods react to a permanent change in the level. The naive forecast uses the most recent observation as the projection for the next period. When volume jumps and stays higher, the latest observed value is already at the new level, so the next forecast immediately rises to that level, producing the step right away.

Other methods smooth or average past data. The cumulative mean blends all previous observations, so the impact of the jump manifests gradually as more data accumulate. A moving average weights the recent data with older ones in a window, so it shifts toward the new level over several periods rather than in a single leap. A weighted mean also disperses the influence over past observations, unless the weight on the most recent observation is dominant, it won’t jump fully in one period.

Thus, the forecast that climbs the step right away is the naive forecast.