A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is “base effect” ?

Question

A rapid increase in the rate of inflation is sometimes attributed to the &ldquo;base effect&rdquo;. What is &ldquo;base effect&rdquo; ?

Admin · Accepted Answer

It is the impact of the price levels of previous year on the calculation of inflation rate

Admin · Answer

It is the impact of drastic deficiency in supply due to failure of crops

Admin · Answer

It is the impact of the surge in demand due to rapid economic growth

Admin · Answer

None of the above

Q. A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is “base effect” ?