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Question
Define Time Reversal Test
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Solution
It is an important test for testing the consistency of a good index number.
This test maintains time consistency by working both forward and backward with respect to time (here time refers to base year and current year).
Symbolically the following relationship should be satisfied.
P01 × p10 = 1
Fisher’s index number formula satisfies the above relationship
`"P"_01^"F" = sqrt((sum"p"_1"p"_0 xx sum"p"_1"q"_1)/(sum"p"_0"q"_0 xx sum"p"_0"q"_1))`
When the base year and current year are interchanged, we get
`"P"_10^"F" = sqrt((sum"p"_0"q"_1 xx sum"p"_0"q"_0)/(sum"p"_1"q"_1 xx sum"p"_1"q"_0))`
`"P"_01^"F" xx "P"_10^"F"` = 1
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______ : Base year prices :: P1 : Current year prices.
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- It is useful in framing suitable economic policies.
- It is useful to present financial data in real terms
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- Index numbers are specialized averages.
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| Commodity | 1995 | 2005 | ||
| Price | Quantity | Price | Quantity | |
| A | 5 | 60 | 15 | 70 |
| B | 4 | 20 | 8 | 35 |
| C | 3 | 15 | 6 | 20 |
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| Groups | Food | Fuel and Lighting |
Clothing | Rent | Miscellaneous |
| Index Number | 2450 | 1240 | 3250 | 3750 | 4190 |
| Weight | 48 | 20 | 12 | 15 | 10 |
Choose the correct alternative:
Another name of consumer’s price index number is:
Choose the correct alternative:
Consumer price index are obtained by:
An Enquiry was made into the budgets of the middle class families in a city gave the following information.
| Expenditure | Food | Rent | Clothing | Fuel | Rice |
| Price(2010) | 150 | 50 | 100 | 20 | 60 |
| Price(2011) | 174 | 60 | 125 | 25 | 90 |
| Weights | 35 | 15 | 20 | 10 | 20 |
What changes in the cost of living have taken place in the middle class families of a city?
Choose the correct pair.
| Group A | Group B |
| 1) Price Index | a) `(sump_1q_1)/(sump_0q_0)xx100` |
| 2) Value Index | b) `(sumq_1)/(sumq_0)xx100` |
| 3) Quantity Index | c) `(sump_1q_1)/(sump_0q_1)xx100` |
| 4) Paasche's Index | d) `(sump_1)/(sump_0)xx100` |
