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A base effect [11] relates to inflation when in the corresponding period of the previous year. If the inflation rate was too low in the corresponding period of the previous year, even a smaller rise in the Price Index will arithmetically give a high rate of inflation now. On the other hand, if the price index had risen at a high rate in the ...
The Marshall-Edgeworth index, credited to Marshall (1887) and Edgeworth (1925), [11] is a weighted relative of current period to base period sets of prices. This index uses the arithmetic average of the current and based period quantities for weighting. It is considered a pseudo-superlative formula and is symmetric. [12]
An alternative is to take the base period for each time period to be the immediately preceding time period. This can be done with any of the above indices. Here is an example with the Laspeyres index, where t n {\displaystyle t_{n}} is the period for which we wish to calculate the index and t 0 {\displaystyle t_{0}} is a reference period that ...
The price in the base year is normalized to 100. For example, for computer hardware, we could define a "unit" to be a computer with a specific level of processing power, memory, hard drive space and so on. A price deflator of 200 means that the current-year price of this computing power is twice its base-year price - price inflation. A price ...
There are four aspects for alternative measures of REER which are (a) using end-of-period or period averages of the nominal exchange rate. (b) choosing price indexes. (c) in obtaining the real effective exchange rates, deciding upon the number of trading partners in calculating the weights. (d) deciding upon the formula to use in aggregation.
To make it more meaningful for year-to-year comparisons, a nominal GDP may be multiplied by the ratio between the value of money in the year the GDP was measured and the value of money in a base year. For example, suppose a country's GDP in 1990 was $100 million and its GDP in 2000 was $300 million. Suppose also that inflation had halved the ...
In economics, a base period or reference period is a point in time used as a reference point for comparison with other periods. [1] [2] It is generally used as a benchmark for measuring financial or economic data. [3] Base periods typically provide a point of reference for economic studies, consumer demand, and unemployment benefit claims.
A compounding period is the length of time that must transpire before interest is credited, or added to the total. [2] For example, interest that is compounded annually is credited once a year, and the compounding period is one year. Interest that is compounded quarterly is credited four times a year, and the compounding period is three months.