Official Answer Key & Detailed Solution
Ready to check the official UPSC Answer Key?
Click any option above to test yourself under exam conditions, or reveal the explanation directly.
Correct Answer: Option (C) — It is the impact of the price levels of previous year on the calculation of inflation rate
Concept & Option Breakdown
Standard Reference VerifiedThe base effect refers to the impact of the price level in the corresponding period of the previous year on the headline inflation rate calculation. If the price index was unusually low in the base period, even a modest rise in the current index can result in a high percentage inflation rate.
Practice Full-Length & Sectional Prelims Mocks on this Interface
50 simulated tests in the APT Prelims Test Series (₹1,493) or 1-on-1 Mentorship with Avinash Sir.