Definition of Base Rate. In the UK, the base rate is the term given to describe the interest rate which the Bank of England control. The base rate is the rate that the Bank charge commercial banks and discount houses. It is also known as the Repo Rate. The base rate is used to influence …
Definition of base year: the starting point for the construction of an index number series. The base period or base year refers to the year in which an index number series begins to be calculated. This will invariably have a starting value of 100. For example, in constructing the Consumer price index, the government may …
Definition: The announcement effect refers to the fact that behaviour can be changed merely by announcing a future policy change. For example, if the government say that petrol tax will increase in 6 months time, people may start spending less money now; they may also look for alternatives to the car. Announcement effects will be …
Definition of The Business cycle – The Business cycle refers to the cyclical nature of economic growth. Typically the business cycles involves a period of rapid growth followed by slower growth or in some cases a recession. The business cycle is sometimes referred to as the ‘trade cycle’ or just economic cycle. Some business cycles …
Definition of competitive devaluation: When a country tries to devalue its currency to increase its international competitiveness. However, this often encourages other countries to also devalue leading to only temporary increases in the competitiveness of exports. In competitive devaluation, a country only gains a temporary advantage until the next country devalues as well. Devaluation can …
Definition constant prices Constant prices are a way of measuring the real change in output. A year is chosen as the base year. For any subsequent year, the output is measured using the price level of the base year. This excludes any nominal change in output and enables a comparison of the actual goods and …
Flight From Money is a situation where people in an economy lose faith in paper money and resort to barter or saving in the form of assets like gold or silver. Flight from money can occur during periods of hyperinflation. Hyperinflation is a situation where the inflation rate becomes very high. This means the value …
The past few years have seen a rapid rise in real food prices – especially, fruit, vegetables and meat. At the same time, we have seen falling real incomes for low-income decile groups. The consequence is that those on low incomes have been changing their diet in response to higher prices. With squeezed real incomes, …