PYQ 2011 : MCQ 13
February, 15 2026 | admin
Year: 2011
PYQ 13.
A rapid increase in the rate of inflation is sometimes attributed to the
“base effect“. What is “base effect”?
(a) It is the impact of drastic deficiency in supply due to failure of crops
(b) It is the impact of the surge in demand due to rapid economic growth
(c) It is the impact of the price levels of previous year on the calculation of inflation rate
(d) None of the statements
Correct Answer: (c) – It is the impact of the price levels of previous year on the calculation of inflation rate.
Subject: Economics
Topic: Macroeconomics → Inflation → Statistical Concepts → Base Effect
Difficulty: Medium
Type: Recall/Factual | Conceptual
Explanation
Option (c) is CORRECT:
The base effect is a statistical phenomenon in year-on-year inflation calculation.
If the previous year’s price level was unusually low, even a modest increase produces
a high inflation rate. If the base year was unusually high, inflation appears lower.
It is a mathematical artefact, not a real economic force.
The base effect is a statistical phenomenon in year-on-year inflation calculation.
If the previous year’s price level was unusually low, even a modest increase produces
a high inflation rate. If the base year was unusually high, inflation appears lower.
It is a mathematical artefact, not a real economic force.
Option (a) is INCORRECT:
Crop failure is a supply-side shock causing real inflation, not a statistical effect.
Crop failure is a supply-side shock causing real inflation, not a statistical effect.
Option (b) is INCORRECT:
Demand surge represents demand-pull inflation — a real macroeconomic cause.
Demand surge represents demand-pull inflation — a real macroeconomic cause.
Option (d) is INCORRECT:
Since (c) correctly explains the base effect, this option is invalid.
Since (c) correctly explains the base effect, this option is invalid.
Yukti (Exam Tip)
The keyword “base” signals a denominator/reference point issue.
Options (a) and (b) describe real economic causes.
Only option (c) describes a statistical computation effect.
In UPSC, whenever you see “base”, think denominator/reference point.
Options (a) and (b) describe real economic causes.
Only option (c) describes a statistical computation effect.
In UPSC, whenever you see “base”, think denominator/reference point.
📰 Current Updates
- 2014: RBI adopted CPI-based inflation targeting under Urjit Patel Committee.
- 2015: CPI base year revised from 2010 to 2012.
- 2020–21: Post-COVID base effects caused sharp global inflation swings.
- 2025: India’s CPI hit 0.25% (Oct) due to favourable base effect.
- 2026: CPI base year revised from 2012 to 2024; food weight reduced.
🔍 Search Coverage: 2026 → 2025 → 2024 → 2021 → 2020 → 2015 → 2014 → 2011
💪 Confidence Level: High | 👻 Fabrication Status: None
💪 Confidence Level: High | 👻 Fabrication Status: None