Nominal Value
BeginnerNominal value is an amount expressed in money terms as it appears at the time, without adjusting for inflation. It is the face amount you see on a price tag, payslip or statement.
Nominal figures are the numbers we see every day. A salary of 40,000, a house price of 300,000 or interest of 5% are all nominal unless someone says otherwise.
The problem with nominal values is that money changes in value over time. A salary of 40,000 today and a salary of 40,000 twenty years ago are the same nominal amount, but the older salary could buy much more because prices were lower back then.
That is why economists compare nominal values with real values, which are adjusted for inflation. If your salary rises from 40,000 to 42,000, a 5% nominal increase, but prices also rise by 5%, your real income has not changed at all.
The word "nominal" is also used in other ways. The nominal value of a bond or share is its face value, the amount printed on it, which may be very different from its market price. In each case, nominal means "as stated", before any adjustment.
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