Nominal money

Nominal money

Nominal money, in economics, is the quantity of money measured in a particular currency and is directly proportional to the price level.

This means, among other things, that if the price level rises by 10%, 10% more money than before is necessary in order to maintain stability. For example, if it costs $20 to buy an item, and the price level increases by 10%, the dollar amount necessary to buy the item increases by 10% (in this case by $2), which brings the total cost of the item to $22.

Real money is the quantity of money measured as a constant (e.g. the value of the dollar in 1997), and it relates to Nominal money as follows:

Nominal money = Price level * Real money.


Real Money = Nominal money/Price Level,

where Real Money is the quantity of money measured in terms of what it will buy. Thus, $22 at the new price level will buy the same amount of goods as $20 at the original price level.

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • money — moneyless, adj. /mun ee/, n., pl. moneys, monies, adj. n. 1. any circulating medium of exchange, including coins, paper money, and demand deposits. 2. See paper money. 3. gold, silver, or other metal in pieces of convenient form stamped by public …   Universalium

  • nominal damages — see damage 2 Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. nominal damages n …   Law dictionary

  • Money Game — is a pricing game on the American television game show The Price Is Right . Debuting on December 25, 1972, it is played for a car and a nominal cash prize (up to $390). GameplayThe contestant is shown a board containing nine two digit number… …   Wikipedia

  • nominal account — UK US noun [C] ► ACCOUNTING a written record of the money a company has made and spent since the beginning of the present accounting period, at the end of which the amount is moved to a permanent account → Compare REAL ACCOUNTS(Cf. ↑real… …   Financial and business terms

  • nominal — ► ADJECTIVE 1) existing in name only. 2) relating to or consisting of names. 3) (of a sum of money) very small; far below the real value or cost. 4) Grammar relating to or functioning as a noun. DERIVATIVES nominally adverb. ORIGIN …   English terms dictionary

  • nominal wages — n. wages stated in terms of money paid, not in terms of purchasing power …   English World dictionary

  • Money illusion — In economics, money illusion refers to the tendency of people to think of currency in nominal, rather than real, terms. In other words, the numerical/face value (nominal value) of money is mistaken for its purchasing power (real value). This is… …   Wikipedia

  • Money supply — Finance Financial markets Bond market …   Wikipedia

  • Nominal income target — A nominal income target is a potential policy conducted by a central bank to target the future level[1] of economic activity in nominal terms (ie. not adjusted for inflation). The central bank could target Gross domestic product (NGDP) or Gross… …   Wikipedia

  • Nominal — In name only. Differences in compounding cause the nominal rate to differ from the effective interest rate. Inflation causes the purchasing power of money to differ from one time to another. The New York Times Financial Glossary * * * nominal… …   Financial and business terms