Nominal Deficit

Oh boy…running a deficit, are we? That means more money is going out than is coming in. For a person, this isn’t so great, but for a country, it may or may not be okay, depending on the country’s economic stability, and whom you ask.

A nominal deficit, as opposed to the real deficit, refers to the dollar amount of the deficit. This is an important distinction, especially if there are inflationary effects ruffling everyone’s feathers. While the real deficit reflects real value, the nominal deficit changes with inflation.

Say the grand nation, Cornucopiapocalypse, is running a deficit. They decide to print money because they don’t know hyperinflation is a thing. Hyperinflation hits...which means that, while they still owe other countries the same real value as before, they owe the other countries more nominally, since each unit of their cornu-currency is worth less than it was before. So the nominal deficit rose, the but the real deficit stayed cool as a cucumber.