Question
A rapid increase in the rate of inflation is sometimes attributed to the base effect. What is base effect?
Answer: Option A
Answer: (a)The base effect relates to inflation in the corresponding period of the previous year: If the inflation rate was too low in the corresponding period of the previous year, even a smaller rise in the price index will arithmetically give a high rate of inflation.
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Answer: (a)The base effect relates to inflation in the corresponding period of the previous year: If the inflation rate was too low in the corresponding period of the previous year, even a smaller rise in the price index will arithmetically give a high rate of inflation.
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