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A measure of a dollar's value with respect to some year. One may use a constant dollar analysis to account for inflation. For example, suppose one wishes to measure changes in the U.S. national debt. It would be most useful to use a constant dollar format, for example, by measuring the national debt for all years in the dollar's value in the year 2000. This eliminates inflation as a consideration when analyzing the national debt.
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Dollars reported in unchanged value compared with the value reported on a previous date. For example, a company may have raised its dividends on each share of common stock from $2.00 in 1986 to $5.00 in 1996. However, after investors have adjusted for consumer price increases during the 10-year period, the 1996 dividend amounts to only $3.60 in constant dollars. In this case, the 1996 dollars are constant in terms of their 1986 purchasing power.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.