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.
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.
All real measurements have some variation depending on the accuracy and precision of the test method and the measurement uncertainty. The use of reported values often involves engineering tolerances.
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 1 inch long until the measuring techniques reach a certain degree of precision. As techniques improve beyond this threshold, it will become clear that 1 inch is not the real value of the gauge block length, but some other number approximates it.
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.