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4.2 Nominal v. Real Interest Rates

Part of Financial Sector in AP® Macroeconomics. Read the opening section, then create a free account for the full interactive lesson, practice, and progress tracking.

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Nominal Interest Rate

The nominal interest rate is the rate you see advertised by banks and financial institutions. It is the percentage charged or earned on a loan or investment before adjusting for inflation.

For example, if a bank offers a loan with a nominal interest rate of 5%, that’s the rate you’ll pay, not considering how inflation affects the value of money over time.

In this unit

10 lessons

  1. 4.1Financial AssetsPreview lesson
  2. 4.2Nominal v. Real Interest RatesThis lesson
  3. 4.3Definition, Measurement, and Functions of MoneyPreview lesson
  4. 4.4.1Banking and Balance SheetsPreview lesson
  5. 4.4.2Expansion of the Money SupplyPreview lesson
  6. 4.5The Money MarketPreview lesson
  7. 4.6.1Introduction to Monetary PolicyPreview lesson
  8. 4.6.2Fractional Reserve Monetary PolicyPreview lesson
  9. 4.6.3Ample Reserve Monetary PolicyPreview lesson
  10. 4.7The Loanable Funds MarketPreview lesson

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