To do this, you need to generate a known RF voltage on the frequency you want to measure. ( Lets say it's 500 mV). You inject this into the radio and read the voltage. You then adjust the gain on the radio, on the same frequency, to read the same voltage. You now know that the radio is calibrated.
Your right it does calibrate the radio. But only to the voltage level you used. In no way does it mean the signal indicated is accurate at other levels. In most uses it doesn't need to of course, it is often sufficient to just indicate that a signal is either above or below the calibrated
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