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Converting nominal values to real values?

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    Hey guys

    Okay I'm massively stuck on this for some reason.

    I've a whole set of export volume data in nominal US$. I want all the data to be in constant 2000 US$ though.

    How do I do this?

    Do I simply divide each observation of the value of the observation in 2000? In other words: \displaystyle Trade\ Volume_{\left(In\ 2000\ US\$\right)} = \frac{\left[Trade\ Volume\right]_t}{\left[Trade\ Volume\right]_{2000}}

    Or do I divide each \displaystyle \left[Trade\ Volume\right]_t by the inflation rate in time \displaystyle t?



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Updated: March 28, 2012
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