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Tests for an Ideal Index Number
1. Factor Reversal Test
Factor Reversal Test indicates that when the price index is multiplied along with a quantity index that is factors are reversed, it should result in the value index.
2. The time reversal test
If we reverse the time subscripts of a quantity or price index, the result must be reciprocal of the original index.
Inflation The inflation rate for a given period can be calculated using the following formula; Inflation = (current retail price index/retail price index in the base year)
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tan45 degrees=tan(90degrees-45degrees)
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