Forecasting & Revenue Estimation Flashcards
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Read the first 7 Forecasting & Revenue Estimation flashcards as text
In revenue forecasting, the 'cone of uncertainty' widens as the forecast horizon extends because:
Answer: Cumulative forecast errors grow with each additional period
Each period's forecast error compounds on previous errors, so uncertainty intervals widen progressively as predictions extend further into the future.
A budget analyst calculates a MAPE of 8% for a revenue forecast. This indicates that on average, the forecast was off by:
Answer: 8% of the actual revenue value
MAPE expresses average forecast error as a percentage of actual values, so 8% means the forecast differed from actuals by 8% of each actual revenue figure on average.
Which scenario planning approach assigns probability weights to alternative economic scenarios before blending them into a single revenue estimate?
Answer: Probabilistic scenario weighting
Probabilistic scenario weighting assigns likelihood percentages to optimistic, baseline, and pessimistic scenarios, then computes a weighted-average revenue estimate.
The leading economic indicator most commonly used to forecast individual income tax revenues is:
Answer: Personal income and wages
Personal income and wages directly determine the taxable income base from which individual income tax revenues are derived.
When a revenue forecast consistently overestimates actual collections over multiple periods, the analyst should first investigate:
Answer: Whether the forecasting model has systematic positive bias
Persistent over-forecasting suggests systematic positive bias in the model's assumptions or structure, which must be identified and corrected to improve accuracy.
The Office of Management and Budget (OMB) requires agencies to use which economic assumptions as the baseline for multi-year budget submissions?
Answer: OMB's own economic forecast
OMB directs agencies to use OMB's official economic assumptions—GDP growth, inflation, interest rates—as the baseline for preparing multi-year budget submissions.
Which statistical concept measures the proportion of variance in revenue that is explained by the independent variables in a regression-based forecast model?
Answer: Coefficient of determination (R²)
R² (coefficient of determination) measures what fraction of the total variance in the dependent variable is explained by the regression model's independent variables.