Constant prices refer to the adjustment of monetary values to account for inflation, allowing for a more accurate comparison of economic data over time. By using a base year as a reference, constant prices help to eliminate the effects of price changes, making it easier to assess real growth or decline in an economy. For example, when analyzing the gross domestic product (GDP) of a country, economists often use constant prices to reflect the true value of goods and services produced. This method provides a clearer picture of economic performance, as it focuses on volume rather than fluctuating prices.