Which of the following statements about Laspeyres and Paasche indices is correct?
A. Laspeyres index tends to understate price increase, Paasche overstates.
B. Fisher's index is the geometric mean of Laspeyres and Paasche.
C. Paasche index satisfies the time reversal test.
D. Laspeyres uses current period quantities, Paasche uses base period quantities.
Answer: Option B
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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