Nominal Interest Rate
Definition
The nominal interest rate refers to the percentage increase in money value that a lender receives from a borrower as compensation for lending money.
Related terms
Real Interest Rate: The nominal interest rate adjusted for inflation.
Federal Reserve (Fed): The central bank of the United States responsible for setting monetary policy and controlling interest rates.
Loanable Funds Market: A market where borrowers and lenders interact to determine the interest rate and quantity of loanable funds exchanged.
"Nominal Interest Rate" appears in:
Study guides (3)
AP Macroeconomics - 4.2 Nominal vs. Real Interest Rates
AP Macroeconomics - 4.5 The Money Market
AP Macroeconomics - 4.6 Monetary Policy
Additional resources (1)
AP Macroeconomics - Unit 4 Overview: Financial Sector
Practice Questions (2)
If the real interest rate is 4% and the inflation rate is 2%, what is the nominal interest rate?
If the inflation rate is higher than the nominal interest rate, what can happen to the real interest rate?
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Resources
Cram Mode
AP Score Calculators
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Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.