CA Foundation Exam > CA Foundation Questions > When the product of price index and the quant...
Start Learning for Free
When the product of price index and the quantity index is equal to the corresponding value index then the test that holds is
- a)Unit Test
- b)Time Reversal Test
- c)Factor Reversal Test
- d)None holds
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
When the product of price index and the quantity index is equal to the...
Factor Reversal Test: It says that the product of a price index and the quantity index should be equal to value index. In the words of Fisher, just as each formula should permit the interchange of the two times without giving inconsistent results similarly it should permit interchanging the prices and quantities without giving inconsistent results which means two results multiplied together should give the true value ratio.
View all questions of this test
Most Upvoted Answer
When the product of price index and the quantity index is equal to the...
Factor Reversal Test
The factor reversal test is a statistical test used to check the accuracy of the price and quantity indices used in measuring changes in the value of a product or group of products over time. It is based on the relationship between the price index, the quantity index, and the value index.
Understanding the Test
The factor reversal test states that if the product of the price index and the quantity index is equal to the corresponding value index, then the test holds. In other words, if the formula Price Index * Quantity Index = Value Index is satisfied, then the price and quantity indices are accurate and reliable measures of changes in the value of a product.
Interpreting the Test
When the factor reversal test holds, it indicates that the changes in the value of a product or group of products are accurately reflected in the price and quantity indices. This means that the indices are consistent and reliable in measuring the changes in value over time.
Implications of the Test
The factor reversal test is an important tool in validating the accuracy of price and quantity indices. If the test does not hold, it suggests that there may be errors or inconsistencies in the measurement of changes in value. In such cases, further analysis and adjustments may be required to ensure the accuracy of the indices.
Example:
Let's consider an example to illustrate the factor reversal test. Suppose we have a product with an initial value of $100, a price index of 1.2, and a quantity index of 0.8.
Using the formula Price Index * Quantity Index = Value Index, we can calculate the value index as follows:
1.2 * 0.8 = 0.96
The calculated value index is 0.96, which indicates that the value of the product has decreased by 4% compared to the initial value.
By comparing the calculated value index with the actual value index, we can determine whether the factor reversal test holds. If the calculated value index matches the actual value index, then the test holds, and the price and quantity indices accurately reflect the changes in value.
The factor reversal test is a statistical test used to check the accuracy of the price and quantity indices used in measuring changes in the value of a product or group of products over time. It is based on the relationship between the price index, the quantity index, and the value index.
Understanding the Test
The factor reversal test states that if the product of the price index and the quantity index is equal to the corresponding value index, then the test holds. In other words, if the formula Price Index * Quantity Index = Value Index is satisfied, then the price and quantity indices are accurate and reliable measures of changes in the value of a product.
Interpreting the Test
When the factor reversal test holds, it indicates that the changes in the value of a product or group of products are accurately reflected in the price and quantity indices. This means that the indices are consistent and reliable in measuring the changes in value over time.
Implications of the Test
The factor reversal test is an important tool in validating the accuracy of price and quantity indices. If the test does not hold, it suggests that there may be errors or inconsistencies in the measurement of changes in value. In such cases, further analysis and adjustments may be required to ensure the accuracy of the indices.
Example:
Let's consider an example to illustrate the factor reversal test. Suppose we have a product with an initial value of $100, a price index of 1.2, and a quantity index of 0.8.
Using the formula Price Index * Quantity Index = Value Index, we can calculate the value index as follows:
1.2 * 0.8 = 0.96
The calculated value index is 0.96, which indicates that the value of the product has decreased by 4% compared to the initial value.
By comparing the calculated value index with the actual value index, we can determine whether the factor reversal test holds. If the calculated value index matches the actual value index, then the test holds, and the price and quantity indices accurately reflect the changes in value.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer?
Question Description
When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer?.
When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer?.
Solutions for When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice When the product of price index and the quantity index is equal to the corresponding value index then the test that holds isa)Unit Testb)Time Reversal Testc)Factor Reversal Testd)None holdsCorrect answer is option 'C'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup