The factor reversal test for index numbers requires that the product of the price index and quantity index equal the:
Correct answer: C. Value index
- A. Base-period expenditure
- B. Current-period expenditure
- C. Value index
- D. Simple aggregative index
Explanation
The factor reversal test requires P01 multiplied by Q01 to equal V01, the value index. This condition checks whether price and quantity changes together explain the change in total value.
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