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With reference to ‘Base effect’, consider the following statements:
- It is the impact that selecting a different reference point for a comparison between two data points can have on the comparison's outcome.
- Base effect cannot distort or mislead the interpretation of numbers/percentage comparisons.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
With reference to ‘Base effect’, consider the following st...
As per revised estimates, India’s industrial output measured in terms of Index of Industrial Production (IIP) bounced back to rise 7.1% in November 2022, after plummeting 4.2% in October 2022 and this rise was aided by base effects.
What is a Base Effect?
- The base effect is the impact that selecting a different reference point for a comparison between two data points can have on the comparison's outcome.
- For Eg: In the context of inflation, the base effect is a distortion in a current inflation figure caused by exceptionally high or low levels of inflation in the previous reference period.
- If the inflation rate was low in the corresponding period of the last year, then even a small increase in the price index will give a high rate of inflation in the current year.
- When comparing two data points, choosing a reference point will be crucial as the base effect can highly distort or mislead the interpretation of numbers.
- The base effect could also result in major differences in percentage comparisons. If we chose a reference point that is too low, there could be an overestimation and if the base is too high, it could result in gross underestimation of the situation.
Hence only statement 1 is correct.
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Community Answer
With reference to ‘Base effect’, consider the following st...
The correct answer is option 'A' - 1 only.
Explanation:
- Base Effect:
The base effect refers to the impact that selecting a different reference point for a comparison between two data points can have on the outcome of the comparison. It is a common concept in economics and statistics.
- Correct Statement:
The first statement is correct as it accurately describes the base effect. By choosing different reference points for comparison, the interpretation of numbers or percentage comparisons can indeed be influenced by the base effect.
- Incorrect Statement:
The second statement is incorrect because the base effect can indeed distort or mislead the interpretation of numbers or percentage comparisons. If not taken into consideration, the base effect can lead to incorrect conclusions or misinterpretations of data.
In conclusion, understanding the base effect is crucial in correctly interpreting data and making informed decisions based on comparisons. It is essential to be aware of how different reference points can impact the outcome of comparisons and to consider this factor when analyzing data.
Explanation:
- Base Effect:
The base effect refers to the impact that selecting a different reference point for a comparison between two data points can have on the outcome of the comparison. It is a common concept in economics and statistics.
- Correct Statement:
The first statement is correct as it accurately describes the base effect. By choosing different reference points for comparison, the interpretation of numbers or percentage comparisons can indeed be influenced by the base effect.
- Incorrect Statement:
The second statement is incorrect because the base effect can indeed distort or mislead the interpretation of numbers or percentage comparisons. If not taken into consideration, the base effect can lead to incorrect conclusions or misinterpretations of data.
In conclusion, understanding the base effect is crucial in correctly interpreting data and making informed decisions based on comparisons. It is essential to be aware of how different reference points can impact the outcome of comparisons and to consider this factor when analyzing data.
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With reference to ‘Base effect’, consider the following statements: It is the impact that selecting a different reference point for a comparison between two data points can have on the comparisons outcome. Base effect cannot distort or mislead the interpretation of numbers/percentage comparisons.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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