Definition of Real GDP

Real GDP

gdp expressed in base-year dollars, calculated by dividing nominal gdp by a price index.

GDP Deflator

Price index used to deflate nominal gdp to real gdp by dividing nominal gdp by the gdp deflator.

Recession

Loosely speaking, a period of less-than-normal economic growth. Technically, a downturn in economic activity in which real gdp falls in two consecutive quarters.

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

Gross domestic product (GDP)

The market value of goods and services produced over time including the
income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S.
residents and corporations overseas.

Real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
financial obligation.

Real capital

Wealth that can be represented in financial terms, such as savings account balances, financial
securities, and real estate.

Real cash flow

A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash
flow is given.

Real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries.

Real interest rate

The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms
of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate
adjusted for inflation.

Real market

The bid and offer prices at which a dealer could do "size." Quotes in the brokers market may
reflect not the real market, but pictures painted by dealers playing trading games.

Real time

A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy).
A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.

Realized compound yield

Yield assuming that coupon payments are invested at the going market interest
rate at the time of their receipt and rolled over until the bond matures.

Realized return

The return that is actually earned over a given time period.

REIT (real estate investment trust)

real estate investment trust, which is similar to a closed-end mutual
fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.

REMIC (real estate mortgage investment conduit)

A pass-through tax entity that can hold mortgages
secured by any type of real property and issue multiple classes of ownership interests to investors in the form
of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform
Act of 1986.

Real Interest Rate

The rate of interest paid on an investment adjusted for inflation

approximated net realizable value at split-off allocation

a method of allocating joint cost to joint products using a
simulated net realizable value at the split-off point; approximated
value is computed as final sales price minus
incremental separate costs

net realizable value approach

a method of accounting for by-products or scrap that requires that the net realizable value of these products be treated as a reduction in the cost of the primary products; primary product cost may be reduced by decreasing either
(1) cost of goods sold when the joint products are sold or
(2) the joint process cost allocated to the joint products

net realizable value at split-off allocation

a method of allocating joint cost to joint products that uses, as the proration base, sales value at split-off minus all costs necessary
to prepare and dispose of the products; it requires
that all joint products be salable at the split-off point

real microprofit center

a center whose output has a market value

realized value approach

a method of accounting for byproducts or scrap that does not recognize any value for these products until they are sold; the value recognized
upon sale can be treated as other revenue or other income

Net realizeable value

The expected revenue to be gained from the sale of an item or
service, less the costs of the sale transaction.

real assets

Assets used to produce goods and services.

real interest rate

Rate at which the purchasing power of an investment increases.

real options

Options embedded in real assets.

real value of $1

Purchasing power–adjusted value of a dollar.

Exchange Rate, Real

The nominal exchange rate corrected for price level differences.

GDP

See gross domestic product.

Interest Rate, Real

Nominal interest rate less expected inflation.

Potential Output or Potential GDP

Output produced when the economy is operating at its natural rate of unemployment.

Real

Measured in base year, or constant, dollars. Contrast with nominal.

Real Business Cycle Theory

Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.

Real Exchange Rate

Exchange rate adjusted for relative price levels.

Real Income

Income expressed in base-year dollars, calculated by dividing nominal income by a price index.

Real Money Supply

Money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.

Real Rate of Interest

See interest rate, real.

Real Wage

Wage expressed in base-year dollars, calculated by dividing the money wage by a price index.

Real Actions (Earnings) Management

Involves operational steps and not simply acceleration
or delay in the recognition of revenue or expenses. The delay or acceleration of shipment would
be an example.

Realized Gains and Losses

Increases or decreases in the fair value of an asset or a liability that
are realized through sale or settlement.

Realizable Revenue A revenue transaction where assets received in exchange for goods and

services are readily convertible into known amounts of cash or claims to cash.

Realized Revenue

A revenue transaction where goods and services are exchanged for cash or
claims to cash.

Net Realizable Value

Selling price of an asset less expenses of bringing the asset into a saleable state and expenses of the sale.

Current Dollars

A variable like gdp is measured in current dollars if each year's value is measured in prices prevailing during that year. In contrast, when measured in real or constant dollars, each year's value is measured in a base year's prices.

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