What is an N2 diagram used for?

An N2 diagram, known for its purpose in systems engineering, is primarily used to define the internal relationships and external interfaces of a system. This kind of diagram visually represents how different components of a system interact with each other and with external entities, which is crucial for understanding system behavior and ensuring all components work together harmoniously.

The focus of an N2 diagram is to clarify how various elements within a system communicate, which helps in identifying any potential issues related to integration and interoperability. By illustrating these relationships, stakeholders can better comprehend the complexity of interactions and dependencies, allowing for more effective system design and analysis.

In contrast, other choices explore different aspects of systems engineering. Budgeting for life cycle costs is more financial management than system interaction representation. Measuring performance characteristics focuses on assessing the efficiency or effectiveness of a system's components rather than their interconnections. Assessing the operational environment pertains to understanding the context in which a system operates, rather than illustrating how its parts interface with one another. Thus, the function of an N2 diagram is distinctly aligned with defining relationships and interfaces, which is why it is considered the correct answer.