Final answer:
The ratio-to-trend method for seasonal indices involves dividing by the trend value to ensure that seasonal indices remain unaffected by any trend component within a time series. The correct option is b.
Step-by-step explanation:
In the ratio-to-trend method for seasonal indices, the indices become free from the trend component of the time series by dividing by the trend value.
Essentially, the method works by calculating a ratio that compares the new intensity (or any other measured value) to the old intensity. This is done so that all other factors cancel out, leaving only the influence of the seasonality.
For example, in the application of this method to price indices, we deflate nominal figures to get real figures by dividing by the price index. We also divide the published price index by 100 if it has been traditionally scaled up to avoid decimals.
This adjustment ensures that the seasonal indices reflect only the seasonal effect and are not distorted by long-term trend components. The correct option is b.