Markets · 6 pages · 12 min
How inflation eats a nominal gain
A nominal gain counts more money units, while inflation means those units buy a smaller basket.
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From the opening
A nominal gain counts money: the account shows more dollars, pounds, or yen than it started with. Inflation eats that gain when the prices of goods and services rise, because the extra money units buy less of a household basket than the same count of units bought before. The opening covers nominal gain counts money units, rising prices shrink what money buys, and keeping up is standing still.
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Inside
- Nominal gain counts money units
- Rising prices shrink what money buys
- Keeping up is standing still
- Falling behind is a real loss
- Where the idea stops applying
- A distinction worth keeping
Sources
- Nominal return
- Purchasing power of money