DEFINITION of 'Base Year'
The first of a series of years in an economic or financial index. A base year is normally set to an arbitrary level of 100. Any year can be chosen as a base year, but typically recent years are chosen. New, more uptodate base years are periodically introduced to keep data current in a particular index.
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BREAKING DOWN 'Base Year'
A base year is the year used for comparison for the level of a particular economic index. The arbitrary level of 100 is selected so that percentage changes (either rising or falling) can be easily depicted. For example, to find that rate of inflation (or any other economic index) between 2005 and 2010, one would make calculations using 2005 as the base year, or the first year in the time set.
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