What does the time-reversal test require of a satisfactory price index?
Correct answer: A. Its two time directions should give reciprocal results
- A. Its two time directions should give reciprocal results
- B. Its price and quantity indexes should be equal
- C. Its index should remain below 100
- D. Its base-year quantities should remain unchanged
Explanation
The time-reversal test requires that reversing the base and current periods produces reciprocal index values, subject to the chosen scale. Equality between price and quantity indexes is not the requirement of this test.
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