Real income indicates earnings that an entity or an individual makes after considering inflation rates. It is also known as real wage when denoting the inflation-adjusted earnings of an individual. Nominal income represents earnings that are not adjusted with subsequent changes in inflation rates.
This upcoming segment summarises the differences between real income and nominal income and if you are keen to know about it, keep reading.
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Real Income |
Nominal Income |
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Real income is the inflation-adjusted earnings of an entity, individual or nation. |
Nominal income does not consider inflation rates while calculating an entity's or individual's earnings. |
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Real wage represents the purchasing power of an individual |
A nominal wage indicates only the earnings of an individual |
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It varies over the years |
It can remain fixed over the years |
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Real earnings are a valuable indicator of an individual's well being as it assesses the number of goods and services bought from that income. |
Nominal earnings only denote an individual's current earnings that are not adjusted to the changes in inflation rates. Hence, it does not represent the well-being of an individual. |
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Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
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