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Nominal definition
Nominal is a value or rate stated in current money terms, with no adjustment for inflation. It shows the face figure at the time it is measured.
Nominal figures appear in interest rates, wages, GDP, returns, and bond values. A nominal interest rate is the stated rate before inflation is taken out; a nominal return is the headline investment gain before purchasing power is considered. The number is taken at face value, whatever inflation does to what that money can buy.
Nominal is the opposite of real. A real value adjusts the nominal figure for inflation to show the change in purchasing power, so a 6% nominal return alongside 3% inflation is close to a 3% real return. Nominal tells you the stated amount; real tells you what it is worth.
Nominal Example
You earn a 6% nominal return on an investment over one year. Inflation across the same year runs at 3%.
Your approximate real return is:
6% - 3% = 3%
The investment grew 6% in nominal terms, but your purchasing power rose only about 3% after inflation.
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