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# Detailed Explanation with Example: Nominal and Real Quantity

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This is an important notion in economics which infuses several concepts dealing with money. We have "nominal" quantities and "real" quantities. For example, one would talk about the nominal price of a house as opposed to real price of the same house. Or one might talk about nominal deficit as opposed to real deficit.
What's the difference between nominal and real quantities and why make the distinction?

Please provide at least 100 words.

https://brainmass.com/economics/inflation/detailed-explanation-example-nominal-real-quantity-519347

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Problem: This is an important notion in economics which infuses several concepts dealing with money. We have "nominal" quantities and "real" quantities. For example, one would talk about the nominal price of a house as opposed to real price of the same house. Or one might talk about nominal deficit as opposed to real deficit.
What's the difference between nominal and real quantities and why make the distinction?

Solution:
A nominal price is the price of something in that year's currency. A real price is the price of something adjusted for inflation. For example, the price of a Big Mac was about 70 cents in 1969 and about \$3.50 in 2012. Both of those prices are nominal prices: 70 cents in 1969 dollars and \$3.50 in 2012 dollars. They can't be compared because the value of a 1969 dollar is different from the value of a 2012 dollar. To compare the prices you have to adjust for inflation. For example, after looking up data on the price levels in 1969 and 2012, you might calculate that a Big Mac in 1969 cost \$3.75 in 2012 dollars. Now you have real prices and can compare them: the price of a 1969 Big Mac is \$3.75 in 2012 dollars, and the price of a 2012 Big Mac is \$3.50 in 2012 dollars, so you can legitimately conclude that Big Macs have actually gotten cheaper since 1969 even though their nominal price (the price printed on the menu) has increased by 400%.

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