Editing Real and nominal value (section)

==Real value==
The nominal value of a commodity bundle tends to change over time. In contrast, by definition, the '''real value''' of the commodity bundle in aggregate remains the same over time. The real values of individual goods or commodities may rise or fall against each other, in relative terms, but a representative commodity bundle as a whole retains its real value as a constant from one period to the next. Real values can for example be expressed in [[constant dollars|constant 1992 dollars]], with the price level fixed 100 at the base date. 

[[File:U.S. Real and Nominal Gas Prices 1996 to 2016 - v1.png|thumb|400px|Comparison of real and nominal gas prices 1996 to 2016, illustrating the formula for conversion. Here the base year is 2016.]]
The price index is applied to adjust the nominal value <math>Q</math> of a quantity, such as wages or total production, to obtain its real value. The real value is the value expressed in terms of [[purchasing power]] in the base year. The index price divided by its base-year value <math>P_t / P_0</math> gives the growth factor of the price index. Real values can be found by dividing the nominal value by the growth factor of a price index. Using the price index growth factor as a divisor for converting a nominal value into a real value, the real value at time ''t'' relative to the base date is:

:<math>\frac{P_0 \cdot Q_t}{P_t}</math>