Investor Glossary-constant dollarsInvestor Glossary-constant dollarsInvestor Glossary-constant dollarsInvestor Glossary-constant dollarsInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Constant Dollars

The HTML to link to this page
 

Constant dollars are dollars that have been adjusted for the impact of inflation, as opposed to current dollars, which are actual dollars paid or received. Constant dollars can be computed by the formula Constant Dollars = Current Dollars x (Previous Consumer Price Index/Current Consumer Price Index), where the Consumer Price Index (CPI) measures the level of inflation. Here's an easy (if unrealistic) example of constant dollars: Suppose your boss gives you a bonus of $1,250 this year compared with $1,000 last year; the CPI this year was 125, while last year it was 100. In constant dollars, you received the same $1,000 each year, since current dollars of $1,250 X 0.80 (i.e., 100/125) equals constant dollars of $1,000. Since the US economy continually experiences inflation, constant dollars provide useful comparisons of amounts paid and received in different time periods. Indeed, the use of current dollars instead of constant dollars is often the hallmark of a dishonest economic argument. A movie star who was "only" making $50,000 in 1937 in current dollars was actually making well over $500,000 in constant dollars.



Rate this constant dollars definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: in escrow, irrevocable trust, FICO score, labor relations, required rate of return, current ratio, debt service coverage, margin rate, risk management, retained earnings, covered put, 1035 exchange, average price per share, phantom income, 144a, Key Rate Duration, implied volatility, quality assurance, cancelled check, reverse mortgage, stock market close, limit order, inflation, liquidity ratio, diluted share, command economy, option premium, EBITDA, ex-dividend, minority interest, FTSE, annual return, 401a, LIBOR, balance sheet, wholly-owned subsidiary, per diem, ex-dividend date, Zero Cost Collar, deferred revenue, stock split, 1031 exchange, VIX, real GDP, deferred tax, class C shares, open position, dividends payable, APR


Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
Investor Glossary Index >>> # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
©2004-2014 Investor Glossary - All rights reserved - Terms of Use