Nominal

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What does 'Nominal' mean

Nominal is an unadjusted rate, value or change in value. This type of measure often reflects the current situation, such as the current price of a car, and doesn't make adjustments to reflect factors such as seasonality or inflation, which provide a more accurate measure in real terms.

BREAKING DOWN 'Nominal'

In most cases, value is measured in real terms rather than nominal terms, which make adjustments to give a more accurate measure.

For example, if you buy a $900 bond and are paid $1,000 for it a year later, your rate of return is 11.1%. This is the nominal rate of return; it is unadjusted and reflects the return on your bond. However, to get a more accurate picture of the actual return, the rate needs to be adjusted for inflation because the purchasing power of the your money has likely changed over the one-year period. Therefore, if inflation for that year is 5%, the real rate of return is only 6.1% (11.1%-5%).

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