Real Value


DEFINITION of 'Real Value'

Nominal value adjusted for inflation. Real value is obtained by removing the effect of price level changes from the nominal value of time-series data, so as to obtain a truer picture of economic trends. The nominal value of time-series data such as gross domestic product and incomes is adjusted by a deflator to derive their real values.


Real values are more important than nominal values for economic measures such as GDP and personal incomes because they help ascertain the extent to which increases over time are driven by inflation and what is driven by actual growth.

For example, if personal income is $50,000 year 1 and $52,000 in year 2, but the rate of inflation is 3%, then the nominal growth rate of income is 4%, while the real growth rate is 1%.

In the U.S., the Bureau of Economic Analysis maintains the GDP Deflator that is used to compute the real rate of economic growth. The Deflator uses 2005 as the base year, which means that it is set to 100 for 2005, with other years reported relative to the 2005 dollar.

  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  3. Nominal GDP

    A gross domestic product (GDP) figure that has not been adjusted ...
  4. Real Gross Domestic Product (GDP)

    An inflation-adjusted measure that reflects the value of all ...
  5. GDP Price Deflator

    An economic metric that accounts for inflation by converting ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which ...
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  1. How can you calculate the difference between nominal value and real value of stock ...

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