Key points
- Real GDP = Nominal GDP adjusted for inflation.
- Real yields = Nominal yields - inflation.
- Real wages matter more than nominal wage growth.
Example
If nominal wage growth is 4% and inflation is 3.5%, real wage growth is just 0.5%—likely insufficient to improve living standards.
In history
In 2022 US GDP grew about 9% in nominal terms but only about 2% after adjusting for inflation.
Related terms