<Dd> r t = g t − i t (\ displaystyle r_ (t) = g_ (t) - i_ (t)) </Dd> <P> The bundle of goods used to measure the Consumer Price Index (CPI) is applicable to consumers . So for wage earners as consumers, an appropriate way to measure real wages is to divide the nominal wage (after - tax) by the growth factor in the CPI . </P> <P> Gross domestic product (GDP) is a measure of aggregate output . Nominal GDP in a particular period reflects prices which were current at the time, whereas real GDP compensates for inflation . Price indices and the U.S. National Income and Product Accounts are constructed from bundles of commodities and their respective prices . In the case of GDP, a suitable price index is the GDP price index . In the U.S. National Income and Product Accounts, nominal GDP is called GDP in current dollars (that is, in prices current for each designated year), and real GDP is called GDP in (base - year) dollars (that is, in dollars that can purchase the same quantity of commodities as in the base year). </P> <Table> <Tr> <Td> If for years 1 and 2 (possibly a span of 20 years apart), the nominal wage and price level P of goods are respectively <Dl> <Dd> nominal wage rate: $10 in year 1 and $16 in year 2 </Dd> <Dd> price level: 1.00 in year 1 and 1.333 in year 2, </Dd> </Dl> <P> then real wages using year 1 as the base year are respectively: </P> <Dl> <Dd> $10 (= $10 / 1.00) in year 1 and $12 (= $16 / 1.333) in year 2 . </Dd> </Dl> <P> The real wage each year measures the buying power of the hourly wage in common terms . In this example, the real wage rate increased by 20 percent, meaning that an hour's wage would buy 20% more goods in year 2 compared with year 1 . </P> </Td> </Tr> </Table>

Gdp that has been adjusted for changes in the price level