Which of the following statements about Laspeyres and Paasche indices is correct?
A. Fisher's index is the geometric mean of Laspeyres and Paasche.
B. Laspeyres uses current period quantities, Paasche uses base period quantities.
C. Paasche index satisfies the time reversal test.
D. Laspeyres index tends to understate price increase, Paasche overstates.
Answer: Option A
Solution (By JKSSB Mock Tests)
Fisher = √(L×P). L uses base quantities, P uses current quantities. L overstates, P understates. Neither L nor P satisfies time reversal.
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