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Real vs. nominal in economics

Real vs. nominal in economics Definition

In economics, the distinction between nominal and real numbers is often made. It corresponds to the distinction between money and inflation-corrected numbers.

Nominal numbers -- such as nominal wages, interest rates and gross domestic product (GDP) -- refer to amounts that are paid or earned in money terms. My paycheck shows my money wage and my car loan agreement indicates the nominal interest rate. Nominal GDP refers to the amount of money spent to buy the production of a country.

Real numbers -- real wages, interest rates, and GDP -- are corrected for the effects of inflation. They indicate the value of these numbers in terms of the purchasing power of wages, interest, or total production. That is, they try to estimate how many goods and services a wage, an interest payment, or total domestic income will buy.

RELATED TERMS
Real wage
RELATED CATEGORIES
Economy







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