A projection of how the economy will develop if existing trends and policies continue unchanged. Models of the economy may be based on theory, econometrics, or some combination of these. Before it is possible to calculate the effects of changing any aspect of nature, technology, or economic policy. It is necessary to construct a baseline projection. This tracks the future of the economy if present levels or trends in natural phenomena, technology, and economic policies continue unchanged. Any calculation of the predicted effects of changes in nature such as oil discoveries, changes in technology such as the introduction of new materials and advanced production techniques, or changes in official policies such as tax rates, tariffs, or interest rates is then conducted in terms of the predicted departure of the economy from the baseline projection.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|