<h2>Nominal Interest Rate</h2>
<p>The nominal interest rate is a fundamental concept in macroeconomics, representing the stated or quoted interest rate on a financial instrument, without adjusting for inflation. It's the rate at which interest is paid on a loan or earned on an investment, expressed as a percentage of the loan or investment amount.</p>

<h2>How It Works</h2>
<p>The nominal interest rate is typically determined by financial institutions based on various factors such as the central bank's policy rate, market conditions, and the borrower's creditworthiness. It's usually quoted on an annual basis, although it can be applied over different periods.</p>
<p>For example, if you take a loan with a nominal interest rate of 5%, you'll pay 5% of the loan amount as interest each year.</p>

<h2>Why It Matters</h2>
<p>The nominal interest rate is crucial for both borrowers and lenders, as it directly influences the cost of borrowing and the return on investments. However, it's essential to understand that the real value of the interest rate can be eroded by inflation.</p>
<p>Consider an inflation rate of 3%. While a nominal interest rate of 5% might seem attractive, the real interest rate (nominal interest rate minus inflation rate) is only 2%. This means that, in real terms, you're only earning 2% on your investment after accounting for the loss of purchasing power due to inflation.</p>