Understanding Inflation Adjustment in Graphs

These flashcards provide vocabulary and concepts related to inflation adjustment in financial graphs, focusing on key terms and their definitions.

Inflation Adjustment

The process of adjusting financial figures to account for the effects of inflation, allowing for a more accurate comparison of values over time.

Nominal Values

Values that have not been adjusted for inflation; they reflect the prices at the time the data was collected.

Real Values

Values that have been adjusted for inflation, providing a more accurate reflection of purchasing power.

Consumer Price Index (CPI)

An index that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, commonly used to adjust for inflation.

Base Year

A year used as a benchmark for comparison in inflation adjustments; all other years’ values are adjusted relative to this period.

Adjusting for Inflation Formula

Real Value = Nominal Value / (1 + Inflation Rate) where the inflation rate is expressed as a decimal.

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a period of time.

Inflation Measurement

The process of determining the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.