In economics, a nominal value is an economic value expressed in historical nominal monetary terms. By contrast, a real value is a value that has been adjusted from a nominal value to remove the effects of general price level changes over time and is thus measured in terms of the general price level in some reference year (the base year). For example, changes in the nominal value of some commodity bundle over time can happen because of a change in the quantities in the bundle or their associated prices, whereas changes in real values reflect only changes in quantities. The process of converting from nominal to real terms is known as inflation adjustment.
Real values are a measure of purchasing power net of any price changes over time. For example, nominal income is often restated as real income, thus removing that part of income changes that merely reflect inflation (a general increase in prices). Similarly, for aggregate measures of output, such as gross domestic product (GDP), the nominal amount reflects production quantities and prices in that time period, whereas the differences between real amounts in different time periods reflect only changes in quantities. A series of real values over time, such as for real GDP, measures quantities over time expressed in prices of one year, called the base year (or more generally the base period). Real values in different years then express values of the bundles as if prices had been constant for all the years, with any differences due to differences in underlying quantities.
The distinction between real value and nominal value occurs in many fields. From a philosophical viewpoint, nominal value represents an accepted condition, which is a goal or an approximation, as opposed to the real value, which is always present. Often a "nominal" value is "de facto" rather than an exact, typical, or average measurement.
Measurement
In measurement, a nominal value is often a value existing in name only; it is assigned as a convenient designation rather than calculated by data analysis or following usual rounding methods. The use of nominal values can be based on de facto standards or some technical standards.
One way to consider this is that the real value often has the characteristics of an irrational number. In real-world measuring situations, improving the measurement technique will eventually begin yielding unpredictable least significant digits. For example, a 1-inch long gauge block will measure to be exactly 1inch long until the measuring techniques reach a certain degree of precision. As techniques improve beyond this threshold, it will become clear that 1inch is not the real value of the gauge block length, but some other number approximates it.
This video explains the difference between real and nominal GDP. Using an example from a pizzeria, the video explains why it’s important to adjust GDP for inflation when examining GDP over time.
Learn more at: https://www.stlouisfed.org/education/gdp-and-pizza-videos
Follow us:
Twitter: https://twitter.com/stlouisfed
Instagram: https://www.instagram.com/stlouisfed/
LinkedIn: https://www.linkedin.com/company/stlo...
Facebook: https://www.facebook.com/stlfed
#gdp #economy #economics #inflation #pizza #teacher #teaching #teachers #students
published: 30 Aug 2022
Nominal and Real Value
published: 09 Feb 2014
Measuring Economic Variables - Nominal v Real
Gian-piero Lovicu (Gigi) explains the difference between nominal and real measures of economic variables.
Explainer on Economic Growth: https://www.rba.gov.au/education/reso...
Resources for teachers and students are available on our website: https://www.rba.gov.au/education/
published: 14 Jul 2020
Inflation Guide Chapter 3: Nominal versus real prices.
"Are you better off today than you were 4 years ago? What about 40 years ago?"
These sorts of questions invite a different kind of query: what exactly do we mean, when we say “better off?” And more importantly, how do we know if we’re better off or not?
To those questions, there’s one figure that can shed at least a partial light: real GDP.
In the previous video, you learned about how to compute GDP. But what you learned to compute was a very particular kind: the nominal GDP, which isn’t adjusted for inflation, and doesn’t account for increases in the population.
A lack of these controls produces a kind of mirage.
For example, compare the US nominal GDP in 1950. It was roughly $320 billion. Pretty good, right? Now compare that with 2015’s nominal GDP: over $17 trillion.
That’s 55 ti...
published: 19 Nov 2015
Real vs Nominal value | Chapter 5, Book 1
This video covers Chapter 5 - 'Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money' of The Wealth of Nations Book 1 by Adam Smith. In this chapter, Adam Smith covers the difference between real and nominal value.
All quotes are from Book 1, Chapter 5.
pages summarized: 17
published: 17 Jun 2019
Economics Glossary: Nominal versus Real Values
Definition of nominal and real assets and an explanation of the difference between the two.
published: 01 Mar 2021
What is Nominal Value?
Video made possible thanks to AI voice generator Eleven Labs, https://elevenlabs.io/?from=josephalexandernordqvistcantoral8044
This video presentation explains what the term "nominal value" means in easy and simple to understand language.
Learn more: https://marketbusinessnews.com/financial-glossary/nominal-value-definition-meaning/
published: 25 Oct 2021
A2 Economics 9708 4. 'Nominal vs Real GDP'
published: 28 Jan 2025
Nominal (money) vs real data and the GDP deflator
Need tutoring for A-level economics? Get in touch via [email protected].
Access http://www.physicsandmathstutor.com 's free comprehensive notes on inflation here: https://pmt.physicsandmathstutor.com/download/Economics/A-level/Notes/CIE/Papers-1-2/4-The-Macroeconomy/b)%20Inflation.pdf?utm_source=youtube&utm_medium=referral&utm_campaign=Enhance_Tuition
This video explains the difference between real and nominal GDP. Using an example from a pizzeria, the video explains why it’s important to adjust GDP for infla...
This video explains the difference between real and nominal GDP. Using an example from a pizzeria, the video explains why it’s important to adjust GDP for inflation when examining GDP over time.
Learn more at: https://www.stlouisfed.org/education/gdp-and-pizza-videos
Follow us:
Twitter: https://twitter.com/stlouisfed
Instagram: https://www.instagram.com/stlouisfed/
LinkedIn: https://www.linkedin.com/company/stlo...
Facebook: https://www.facebook.com/stlfed
#gdp #economy #economics #inflation #pizza #teacher #teaching #teachers #students
This video explains the difference between real and nominal GDP. Using an example from a pizzeria, the video explains why it’s important to adjust GDP for inflation when examining GDP over time.
Learn more at: https://www.stlouisfed.org/education/gdp-and-pizza-videos
Follow us:
Twitter: https://twitter.com/stlouisfed
Instagram: https://www.instagram.com/stlouisfed/
LinkedIn: https://www.linkedin.com/company/stlo...
Facebook: https://www.facebook.com/stlfed
#gdp #economy #economics #inflation #pizza #teacher #teaching #teachers #students
Gian-piero Lovicu (Gigi) explains the difference between nominal and real measures of economic variables.
Explainer on Economic Growth: https://www.rba.gov.au/...
Gian-piero Lovicu (Gigi) explains the difference between nominal and real measures of economic variables.
Explainer on Economic Growth: https://www.rba.gov.au/education/reso...
Resources for teachers and students are available on our website: https://www.rba.gov.au/education/
Gian-piero Lovicu (Gigi) explains the difference between nominal and real measures of economic variables.
Explainer on Economic Growth: https://www.rba.gov.au/education/reso...
Resources for teachers and students are available on our website: https://www.rba.gov.au/education/
If there are changes in the price level, how do we use that information to convert the prices we see everyday into numbers that we can actually compare? Learn h...
"Are you better off today than you were 4 years ago? What about 40 years ago?"
These sorts of questions invite a different kind of query: what exactly do we m...
"Are you better off today than you were 4 years ago? What about 40 years ago?"
These sorts of questions invite a different kind of query: what exactly do we mean, when we say “better off?” And more importantly, how do we know if we’re better off or not?
To those questions, there’s one figure that can shed at least a partial light: real GDP.
In the previous video, you learned about how to compute GDP. But what you learned to compute was a very particular kind: the nominal GDP, which isn’t adjusted for inflation, and doesn’t account for increases in the population.
A lack of these controls produces a kind of mirage.
For example, compare the US nominal GDP in 1950. It was roughly $320 billion. Pretty good, right? Now compare that with 2015’s nominal GDP: over $17 trillion.
That’s 55 times bigger than in 1950!
But wait. Prices have also increased since 1950. A loaf of bread, which used to cost a dime, now costs a couple dollars. Think back to how GDP is computed. Do you see how price increases impact GDP?
When prices go up, nominal GDP might go up, even if there hasn’t been any real growth in the production of goods and services. Not to mention, the US population has also increased since 1950.
As we said before: without proper controls in place, even if you know how to compute for nominal GDP, all you get is a mirage.
So, how do you calculate real GDP? That’s what you’ll learn today.
In this video, we’ll walk you through the factors that go into the computation of real GDP.
We’ll show you how to distinguish between nominal GDP, which can balloon via rising prices, and real GDP—a figure built on the production of either more goods and services, or more valuable kinds of them. This way, you’ll learn to distinguish between inflation-driven GDP, and improvement-driven GDP.
Oh, and we’ll also show you a handy little tool named FRED — the Federal Reserve Economic Data website.
FRED will help you study how real GDP has changed over the years. It’ll show you what it looks like during healthy times, and during recessions. FRED will help you answer the question, “If prices hadn’t changed, how much would GDP truly have increased?”
FRED will also show you how to account for population, by helping you compute a key figure: real GDP per capita. Once you learn all this, not only will you see past the nominal GDP-mirage, but you’ll also get an idea of how to answer our central question:
"Are we better off than we were all those years ago?"
Macroeconomics Course: http://bit.ly/39ltfFi
Next video: http://bit.ly/3bsTBXh
Help us caption & translate this video!
http://amara.org/v/H0PX/
00:00 Intro
00:36 2 Ways GDP Can Increase
01:31 Real GDP
02:05 Example - US Nominal GDP FRED
03:13 Example - Real US GDP FRED
04:14 Real GDP Per Capita (Controlling for Population Changes)
04:47 Example - Real US GDP Per Capita FRED
05:44 Recessions
06:16 Percent Annual Changes
"Are you better off today than you were 4 years ago? What about 40 years ago?"
These sorts of questions invite a different kind of query: what exactly do we mean, when we say “better off?” And more importantly, how do we know if we’re better off or not?
To those questions, there’s one figure that can shed at least a partial light: real GDP.
In the previous video, you learned about how to compute GDP. But what you learned to compute was a very particular kind: the nominal GDP, which isn’t adjusted for inflation, and doesn’t account for increases in the population.
A lack of these controls produces a kind of mirage.
For example, compare the US nominal GDP in 1950. It was roughly $320 billion. Pretty good, right? Now compare that with 2015’s nominal GDP: over $17 trillion.
That’s 55 times bigger than in 1950!
But wait. Prices have also increased since 1950. A loaf of bread, which used to cost a dime, now costs a couple dollars. Think back to how GDP is computed. Do you see how price increases impact GDP?
When prices go up, nominal GDP might go up, even if there hasn’t been any real growth in the production of goods and services. Not to mention, the US population has also increased since 1950.
As we said before: without proper controls in place, even if you know how to compute for nominal GDP, all you get is a mirage.
So, how do you calculate real GDP? That’s what you’ll learn today.
In this video, we’ll walk you through the factors that go into the computation of real GDP.
We’ll show you how to distinguish between nominal GDP, which can balloon via rising prices, and real GDP—a figure built on the production of either more goods and services, or more valuable kinds of them. This way, you’ll learn to distinguish between inflation-driven GDP, and improvement-driven GDP.
Oh, and we’ll also show you a handy little tool named FRED — the Federal Reserve Economic Data website.
FRED will help you study how real GDP has changed over the years. It’ll show you what it looks like during healthy times, and during recessions. FRED will help you answer the question, “If prices hadn’t changed, how much would GDP truly have increased?”
FRED will also show you how to account for population, by helping you compute a key figure: real GDP per capita. Once you learn all this, not only will you see past the nominal GDP-mirage, but you’ll also get an idea of how to answer our central question:
"Are we better off than we were all those years ago?"
Macroeconomics Course: http://bit.ly/39ltfFi
Next video: http://bit.ly/3bsTBXh
Help us caption & translate this video!
http://amara.org/v/H0PX/
00:00 Intro
00:36 2 Ways GDP Can Increase
01:31 Real GDP
02:05 Example - US Nominal GDP FRED
03:13 Example - Real US GDP FRED
04:14 Real GDP Per Capita (Controlling for Population Changes)
04:47 Example - Real US GDP Per Capita FRED
05:44 Recessions
06:16 Percent Annual Changes
This video covers Chapter 5 - 'Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money' of The Wealth of Nations Boo...
This video covers Chapter 5 - 'Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money' of The Wealth of Nations Book 1 by Adam Smith. In this chapter, Adam Smith covers the difference between real and nominal value.
All quotes are from Book 1, Chapter 5.
pages summarized: 17
This video covers Chapter 5 - 'Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money' of The Wealth of Nations Book 1 by Adam Smith. In this chapter, Adam Smith covers the difference between real and nominal value.
All quotes are from Book 1, Chapter 5.
pages summarized: 17
Video made possible thanks to AI voice generator Eleven Labs, https://elevenlabs.io/?from=josephalexandernordqvistcantoral8044
This video presentation explains...
Video made possible thanks to AI voice generator Eleven Labs, https://elevenlabs.io/?from=josephalexandernordqvistcantoral8044
This video presentation explains what the term "nominal value" means in easy and simple to understand language.
Learn more: https://marketbusinessnews.com/financial-glossary/nominal-value-definition-meaning/
Video made possible thanks to AI voice generator Eleven Labs, https://elevenlabs.io/?from=josephalexandernordqvistcantoral8044
This video presentation explains what the term "nominal value" means in easy and simple to understand language.
Learn more: https://marketbusinessnews.com/financial-glossary/nominal-value-definition-meaning/
Need tutoring for A-level economics? Get in touch via [email protected].
Access http://www.physicsandmathstutor.com 's free comprehensive notes on infla...
Need tutoring for A-level economics? Get in touch via [email protected].
Access http://www.physicsandmathstutor.com 's free comprehensive notes on inflation here: https://pmt.physicsandmathstutor.com/download/Economics/A-level/Notes/CIE/Papers-1-2/4-The-Macroeconomy/b)%20Inflation.pdf?utm_source=youtube&utm_medium=referral&utm_campaign=Enhance_Tuition
Need tutoring for A-level economics? Get in touch via [email protected].
Access http://www.physicsandmathstutor.com 's free comprehensive notes on inflation here: https://pmt.physicsandmathstutor.com/download/Economics/A-level/Notes/CIE/Papers-1-2/4-The-Macroeconomy/b)%20Inflation.pdf?utm_source=youtube&utm_medium=referral&utm_campaign=Enhance_Tuition
This video explains the difference between real and nominal GDP. Using an example from a pizzeria, the video explains why it’s important to adjust GDP for inflation when examining GDP over time.
Learn more at: https://www.stlouisfed.org/education/gdp-and-pizza-videos
Follow us:
Twitter: https://twitter.com/stlouisfed
Instagram: https://www.instagram.com/stlouisfed/
LinkedIn: https://www.linkedin.com/company/stlo...
Facebook: https://www.facebook.com/stlfed
#gdp #economy #economics #inflation #pizza #teacher #teaching #teachers #students
Gian-piero Lovicu (Gigi) explains the difference between nominal and real measures of economic variables.
Explainer on Economic Growth: https://www.rba.gov.au/education/reso...
Resources for teachers and students are available on our website: https://www.rba.gov.au/education/
"Are you better off today than you were 4 years ago? What about 40 years ago?"
These sorts of questions invite a different kind of query: what exactly do we mean, when we say “better off?” And more importantly, how do we know if we’re better off or not?
To those questions, there’s one figure that can shed at least a partial light: real GDP.
In the previous video, you learned about how to compute GDP. But what you learned to compute was a very particular kind: the nominal GDP, which isn’t adjusted for inflation, and doesn’t account for increases in the population.
A lack of these controls produces a kind of mirage.
For example, compare the US nominal GDP in 1950. It was roughly $320 billion. Pretty good, right? Now compare that with 2015’s nominal GDP: over $17 trillion.
That’s 55 times bigger than in 1950!
But wait. Prices have also increased since 1950. A loaf of bread, which used to cost a dime, now costs a couple dollars. Think back to how GDP is computed. Do you see how price increases impact GDP?
When prices go up, nominal GDP might go up, even if there hasn’t been any real growth in the production of goods and services. Not to mention, the US population has also increased since 1950.
As we said before: without proper controls in place, even if you know how to compute for nominal GDP, all you get is a mirage.
So, how do you calculate real GDP? That’s what you’ll learn today.
In this video, we’ll walk you through the factors that go into the computation of real GDP.
We’ll show you how to distinguish between nominal GDP, which can balloon via rising prices, and real GDP—a figure built on the production of either more goods and services, or more valuable kinds of them. This way, you’ll learn to distinguish between inflation-driven GDP, and improvement-driven GDP.
Oh, and we’ll also show you a handy little tool named FRED — the Federal Reserve Economic Data website.
FRED will help you study how real GDP has changed over the years. It’ll show you what it looks like during healthy times, and during recessions. FRED will help you answer the question, “If prices hadn’t changed, how much would GDP truly have increased?”
FRED will also show you how to account for population, by helping you compute a key figure: real GDP per capita. Once you learn all this, not only will you see past the nominal GDP-mirage, but you’ll also get an idea of how to answer our central question:
"Are we better off than we were all those years ago?"
Macroeconomics Course: http://bit.ly/39ltfFi
Next video: http://bit.ly/3bsTBXh
Help us caption & translate this video!
http://amara.org/v/H0PX/
00:00 Intro
00:36 2 Ways GDP Can Increase
01:31 Real GDP
02:05 Example - US Nominal GDP FRED
03:13 Example - Real US GDP FRED
04:14 Real GDP Per Capita (Controlling for Population Changes)
04:47 Example - Real US GDP Per Capita FRED
05:44 Recessions
06:16 Percent Annual Changes
This video covers Chapter 5 - 'Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money' of The Wealth of Nations Book 1 by Adam Smith. In this chapter, Adam Smith covers the difference between real and nominal value.
All quotes are from Book 1, Chapter 5.
pages summarized: 17
Video made possible thanks to AI voice generator Eleven Labs, https://elevenlabs.io/?from=josephalexandernordqvistcantoral8044
This video presentation explains what the term "nominal value" means in easy and simple to understand language.
Learn more: https://marketbusinessnews.com/financial-glossary/nominal-value-definition-meaning/
Need tutoring for A-level economics? Get in touch via [email protected].
Access http://www.physicsandmathstutor.com 's free comprehensive notes on inflation here: https://pmt.physicsandmathstutor.com/download/Economics/A-level/Notes/CIE/Papers-1-2/4-The-Macroeconomy/b)%20Inflation.pdf?utm_source=youtube&utm_medium=referral&utm_campaign=Enhance_Tuition
In economics, a nominal value is an economic value expressed in historical nominal monetary terms. By contrast, a real value is a value that has been adjusted from a nominal value to remove the effects of general price level changes over time and is thus measured in terms of the general price level in some reference year (the base year). For example, changes in the nominal value of some commodity bundle over time can happen because of a change in the quantities in the bundle or their associated prices, whereas changes in real values reflect only changes in quantities. The process of converting from nominal to real terms is known as inflation adjustment.
Real values are a measure of purchasing power net of any price changes over time. For example, nominal income is often restated as real income, thus removing that part of income changes that merely reflect inflation (a general increase in prices). Similarly, for aggregate measures of output, such as gross domestic product (GDP), the nominal amount reflects production quantities and prices in that time period, whereas the differences between real amounts in different time periods reflect only changes in quantities. A series of real values over time, such as for real GDP, measures quantities over time expressed in prices of one year, called the base year (or more generally the base period). Real values in different years then express values of the bundles as if prices had been constant for all the years, with any differences due to differences in underlying quantities.