Answer
See sample answer below.
Work Step by Step
The model is good for estimating how things will go in the short term, assuming that the environment will be much similar to the one at the time of creating the model.
An investor, who might be taking this as an input, must also be on the lookout of other circumstances in the economy,
e.g.
- is the GDP growing at a sufficient rate
- what is happening with the unemployment rate
- how are the indices of the stock markets behaving
- is there an outbreak of Ebola or pandemic somewhere in the world
Many factors can cause the curve to skew one way or the other.
So, it can be ONE input for decision making, and only in the short term, provided that circumstances do not drastically change.
