Question

Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.

A. overestimate; overestimate
B. overestimate; underestimate
C. underestimate; overestimate
D. underestimate; underestimate
E. accurately; accurately

Answer 1

The answer is B. overestimate; underestimate

Step-by-step explanation:

The geometric mean differs from the arithmetic average, or arithmetic mean, in how it's calculated because it takes into account the compounding that occurs from period to period.