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

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

CollectorBabu · Accepted Answer

Correct Answer: It is the impact of the price levels of the previous year on the calculation of inflation rate.. The base effect refers to the impact of the rise in the price level in the previous year over the corresponding rise in price levels in the current year. Monetary authorities like RBI takes into account the base effect while manipulating inflation to formulate optimal Monetary policy for the base effect which exaggerate or attenuate effects.

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

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

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