Competitiveness

The ability of an economy to supply increasing *aggregate demand and maintain exports. Increasing imports and falling exports usually signal a loss of competitiveness. However, competitiveness is often measured in a narrower sense by comparing relative inflation rates, for instance. If the ster­ ling-dollar exchange rate remains con­stant, but prices rise faster in the UK than in the US, UK goods will become rel­atively more expensive, reflecting a loss in competitiveness; this, in turn, may lead to falling demand for exports.