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Real Value
June 06 , 2012

Say you are asked the average tuition fee for a graduate programme in college today, you might estimate Rs.10 lakh. If you are asked the same fee in the year 2030, you would doubtless know it would cost a lot more. But how much? You would need to account for inflation in the interim, even if there were no other changes in structure.

To solve this problem in comparing amounts in different time periods, we often use a common base year. And then express all amounts in that base year, ignoring inflation. Such numbers are called real values. They help to put different numbers in perspective, without having to mentally account for inflation every time. Obviously, to arrive at the actual cost in that year, inflation would have to be considered.

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