A rapid increase in the rate of inflation is sometimes attributed to the "base effect". What is "base effect"?
AIt is the impact of drastic deficiency in supply due to failure of crops
BIt is the impact of the surge in demand due to rapid economic growth
CIt is the impact of the price levels of previous year on the calculation of inflation rate
DNone of the statements (a), (b) and (c) given above is correct in this context
Answer & Solution
Correct answer: C. It is the impact of the price levels of previous year on the calculation of inflation rate
UPSC CSE Prelims 2011 (GS-I, Set A), Q.13. Official answer key: C.
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