nominal value

nominal value

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  • es valor nominal
  • eu balio izendatu
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Real versus nominal value (economics)

In economics, nominal (or, in effect, "named") value refers to value measured in terms of absolute money amounts, whereas real value is considered and measured against the actual goods or services for which it can be exchanged at a given time. For example, if one is offered a salary of $40,000, in that year, the real and nominal values are both $40,000. The following year, any inflation means that although the nominal value remains $40,000, because prices have risen, the salary will buy fewer goods and services, and thus its real value has decreased in accordance with inflation. On the other hand, ownership of an asset that holds its value, such as a diamond (making the vastly simplifying assumption of a generally steady market) may increase in nominal price increase from year to year, but its real value, i.e. its value in relation to other goods and services for which it can be exchanged, or its purchasing power, is consistent over time, because inflation has affected both its nominal value and other goods' nominal value. In spite of changes in the price, it can be sold and an equivalent amount of emeralds can be purchased, because the emerald's prices will have increased with inflation as well.
In macroeconomics, the real gross domestic product, or real GDP, compensates for inflation so economists can exclude inflation from growth figures, and see how much the economy actually did grow. Nominal GDP would include inflation, and thus be higher.

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