What Is the Difference Between Nominal Variables and Real Variables

question 76

Essay

What is the difference between nominal variables and real variables? Discuss the calculations undertaken to determine the real wage rate and the real interest rate.Explain why the real wage rate and real interest rate are real variables.

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Definitions:

Interest Revenue

Earnings received for interest.

Fiscal Year

A 12-month period used for accounting purposes and the preparation of financial statements, which may or may not align with the calendar year.

Discounted Note

A promissory note issued at a price lower than its face value that promises to pay the holder the full face value at maturity.

Journal Entry

A record in accounting journals that details a business transaction, including information about debits and credits to various accounts.