Economists refer to prices from a given year as nominal or current prices. Nominally, gas was more expensive in 1997. To compare the prices taking into account the changing value of money, we convert one of the prices to the same year as the other. Usually, we convert forward to the more recent year, but one could also convert back to the earlier year. So gasoline was significantly cheaper in 1997 than it was in 1990.
Economists say that the equivalent price in a different year is in real or constant dollars .
The process of converting is often called converting to constant dollars. Another use of the CPI is to convert an entire series of price to constant dollars. The price drops significantly in 1998 to 8.7 per kilowatt-hour. Since the value of the dollar decreased each year, this graph is not a realistic depiction of electricity costs over this period . To get a more accurate understanding, we convert the entire data series to constant 1998 dollars.