The 'base effect' in inflation refers to: MCQ with Answer and Explanation

Question

Share Report Error

The 'base effect' in inflation refers to:

A. inflation measured against a low or high price level in the previous year

B. the effect of exchange rate on imports

C. the effect of changing the base year of GDP

D. the effect of money supply on prices

Answer: Option A

Solution (By JKSSB Mock Tests)

Base effect refers to the influence of the previous year's price level on the current inflation rate.

This question belongs to: Economy GK Economy Set 1

Request complete Subject PDF

Discuss this Question (0)

No comments yet. Be the first to start the discussion!

Practice More Economy Set 1 Questions

Question #1

Which of the following is a characteristic of a closed economy?

A. Free capital flows

B. High volume of exports and imports

C. Membership of WTO only

D. No foreign trade

View Answer & Solution Discuss

Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
A closed economy does not engage in international trade or capital flows. It is self-sufficient and isolated from the rest of the world.

This question belongs to: Economy GK Economy Set 1

Question #2

The concept of 'Network Externalities' implies that:

A. Only production externalities matter

B. The value of a good or service increases with the number of other users

C. Externalities are always negative

D. The value of a good decreases with the number of users

View Answer & Solution Discuss

Get Complete Subject PDF for Economy GK

Correct Answer: Option B

Explanation:
Network externalities exist when the utility that a user derives from a good or service depends positively on the number of other users of the same or compatible goods.

This question belongs to: Economy GK Economy Set 1

Question #3

In the context of exchange-rate regimes, a 'Currency Board' arrangement is characterised by:

A. Only a crawling peg

B. A fixed exchange rate backed by a full foreign-exchange reserve cover of the monetary base and limited monetary discretion

C. Complete monetary discretion without any reserve backing

D. A freely floating exchange rate

View Answer & Solution Discuss

Get Complete Subject PDF for Economy GK

Correct Answer: Option B

Explanation:
A currency board maintains a fixed exchange rate to an anchor currency, backs the entire monetary base with foreign reserves, and severely restricts the scope for discretionary monetary policy.

This question belongs to: Economy GK Economy Set 1

Explore All Economy Set 1 MCQs