If you want to forecast monthly expenses, which modeling approach would you use?

• A. Classification
• B. Regression
• C. Forecasting
• D. Clustering

Answer: (C)

Forecasting future values in a time series is the right approach when your goal is monthly expenses. Monthly expenses form a sequence over time that often shows trends, seasonality, and dependence on past values. Forecasting models are built to capture these temporal patterns, providing a predicted next month and a sense of uncertainty through prediction intervals. This makes forecasting the most appropriate choice for estimating monthly expenses.

Classification would assign categories to data rather than predict a numeric amount. Clustering groups similar observations without producing future numeric forecasts. Regression predicts a numeric value using given features, but it doesn’t inherently model the time-dependent structure unless you add temporal features, whereas forecasting models are designed to handle time relationships and seasonal effects directly.