BASE EFFECT #Inflation It refers to the impact of the rise | UPSC Economy
BASE EFFECT
#Inflation
It refers to the impact of the rise in price level (i.e., last year’s infation) in the previous year over the corresponding rise in price levels in the current year (i.e., current infation).
If the price index had risen at a high rate in the corresponding period of the previous year, leading to a high infation rate, some of the potential rise is already factored in, therefore, a similar absolute increase in the Price index in the current year will lead to a relatively lower infation rates.
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