raunverðu

raunverðu is an Icelandic term that translates to "real value" or "actual price." It is used in economic and financial contexts to distinguish between a nominal or stated price and the price adjusted for inflation or other economic factors. When referring to raunverðu, an analysis or calculation takes into account the purchasing power of money over time. This is important for understanding the true worth of an asset, income, or transaction, as the nominal value can be misleading due to changes in the general price level. For instance, comparing wages from different years using only their nominal values would not accurately reflect changes in living standards. To assess the true increase or decrease in purchasing power, the wages must be converted to raunverðu, using a price index such as the consumer price index. Similarly, in investment, raunverðu is used to measure the real return on an investment, which is the nominal return minus the inflation rate. This provides a more accurate picture of the investment's performance.