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CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series

A firm's total value of goods was ₹5,00,000 in the base year and ₹7,80,000 in the current year. The Fisher price index is 120. Assuming the factor reversal test holds, what is the Fisher quantity index?

Under the factor reversal test, the price index multiplied by the quantity index equals the value ratio. The value ratio is 780000 divided by 500000, which is 1.56. Dividing by the price index of 1.2 gives a quantity index of 1.30, or 130.

  1. A156
  2. B120
  3. C130Correct
  4. D65

Explanation

The factor reversal test says P01 × Q01 = V1/V0 = 7,80,000/5,00,000 = 1.56. So Q01 = 1.56/1.2 = 1.30, or 130. Option 156 is the value ratio itself, not the quantity index.

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