When economists compute the real value of an economic variable denominated in dollars, they do so by:
A) dividing the nominal value by 100.
B) multiplying the nominal value by the price level.
C) dividing the nominal value by the price index.
D) subtracting the price level from the nominal value and multiplying by 100.

Question

Quizplus · Accepted Answer

To compute the real value of an economic variable, economists adjust the nominal value by dividing it by a price index (like the Consumer Price Index) to account for inflation. This process removes the effects of price changes over time, allowing for a comparison of economic quantities in terms of purchasing power.

When Economists Compute the Real Value of an Economic Variable