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Nominal is a phrase used in finance to refer to a value or quantity that is expressed in absolute terms without taking inflation or other economic factors into account. Real values, on the other hand, are adjusted for changes in the price level over time, whereas nominal values are expressed in current dollars.
The nominal value of a stock, for instance, is the real dollar value of the shares at the moment of acquisition or sale, without taking inflation or shifts in the general level of prices into account. The stated interest rate on a loan or investment is what is meant by nominal interest rates, which do not take inflation or shifts in buying power into consideration.
Real values, on the other hand, reflect the value or quantity in question's actual purchasing power by accounting for inflation or other economic considerations. Real values are often expressed in units that have been adjusted for changes in the price level, such as constant dollars or other units.
When comparing economic data over a brief period of time, such as when watching movements in the stock market or interest rates, nominal numbers might be helpful. Real values, however, are frequently more helpful when comparing economic statistics over longer time periods or across other nations or regions because they give a more realistic picture of changes in purchasing power and economic growth.
