In real terms

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gavroche

Getting old but not past it
Location
North Wales
Politicians keep coming up with this expression when relating to how the taxpayers money is spent or wasted. Could someone tell me what "in real term" actually mean. To me, every time you spend money, it is in real time, not a fiction.
 
as time passes due to inflation, the value of money in a year is worth less than today so they use a discount rate to value the pound in the future, usually at the governments cost of borrowing. In other words £1 in 12 months in real terms is worth £0.97 and in 24months £0.95 and so on.
 

Drago

Legendary Member
It depends on the context, but "real terms" tends to mean as a percentage of GDP, or a percentage of income, or a percentage of some other financial measure - the value of a unit of currency decreases over time due to inflation, so pure numeric terms become unrepresentative, but when expressed in relative - or real - terms a valid comparison can still be made.
 
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