Additive and Multiplicative Models in Time Series Modeling

When do we use an additive model? When do we use a multiplicative model?

Time series is particularly useful for tracking variables such as revenues, costs, and profits over time. Time series models help evaluate performance and make predictions. Time series decomposition seeks to separate the time series (Y) into four components: trend (T), cycle (C), seasonal (S), and irregular (I). What is the difference between these components? The model can be additive or multiplicative. When do we use an additive model? When do we use a multiplicative model?