Real income

Real income

Real income is the income of individuals or nations after adjusting for inflation. It is calculated by subtracting inflation from the nominal income. Real variables, such as real income, real GDP, and real interest rate are variables that are measured in physical units, while nominal variables such as nominal income, nominal GDP, and nominal interest rate are measured in monetary units. Therefore, real income is a more useful indicator of well-being, since it is based on the amount of goods and services that can be purchased with the income. According to the classical dichotomy theory, real variables and nominal variables are separate in the long-run, meaning they are not influenced by each other. In other words if the nominal starting income was 100 and there was a 10% inflation (general rise in prices eg: what cost 10 now costs 11) rate. So now with 100 you can buy less and if your income is not adjusted by inflation (did not rise by 10%),your real income has dropped 10%

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  • real income — The income of an individual, group, or country adjusted for inflation. Bloomberg Financial Dictionary * * * real income real income ➔ income * * * real income UK US noun [C or U] (also real wages [plural]) ► FINANCE, ECONOMICS the money earned by …   Financial and business terms

  • Real Income — The income of an individual or group after taking into consideration the effects of inflation on purchasing power. For example, if you received a 2% salary rise over the previous year and inflation for the year was 1%, then your real income only… …   Investment dictionary

  • real income — A measure of the real purchasing power of nominal income; real income is nominal income adjusted for changes in the general price level, or income corrected for inflation or deflation. See also real earnings …   Black's law dictionary

  • real income — /ree euhl, reel/ the amount of goods and services that money income will buy. [1925 30] * * * real income , ● real …   Useful english dictionary

  • real income — /ree euhl, reel/ the amount of goods and services that money income will buy. [1925 30] * * * …   Universalium

  • real income — value of the income as influenced by changes in the index …   English contemporary dictionary

  • real income — /ˈril ɪnkʌm/ (say reel inkum) noun income adjusted to take account of inflation …  

  • real income — /rɪəl ɪnkʌm/ noun same as real earnings …   Dictionary of banking and finance

  • Income inequality in the United States — is the extent to which income, most commonly measured by household or individual, is distributed in an uneven manner. While there seems to be consensus among social scientists that some degree of income inequality is needed, the extent of income… …   Wikipedia

  • real wages — ➔ wage * * * real wages UK US noun [plural] (also real income [C or U]) ► ECONOMICS the value of money earned by workers in an economy at a particular time, after taking into account the effect of inflation on what can be bought with that money:… …   Financial and business terms

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