When goods and services produced in a year are valued at the prices prevailing in that particular year, we get nominal income. Nominal Income = Current Price (P1) × Current quantity (Q1)
When goods and services produced in a year are valued at prices of a fixed base year, we get Real income. Real income = Base Year Price (P0) × Current quantity (Q1)
Nominal income can be converted to real income by the following:
Real income = Nominal income / Current Price Index * 100