Courses on Khan Academy are always 100% free. Start practicing—and saving your progress—now:

The market for loanable funds brings savers and borrowers together. We can also represent the same idea using a mathematical model. In this video, learn about the savings and investment identity. AP(R) Macroeconomics on Khan Academy: Macroeconomics is all about how an entire nationÕs performance is determined and improved over time. Learn how factors like unemployment, inflation, interest rates, economic growth and recession are caused and how they affect individuals and society as a whole. We hit the traditional topics from an AP Macroeconomics course, including basic economic concepts, economic indicators, and the business cycle, national income and price determination, the financial sector, the long-run consequences of stabilization policies, and international trade and finance. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We’ve also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything

View more lessons or practice this subject at

AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we’ll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us!

Khan Academy is a nonprofit organization with the mission of providing a free, world-class education for anyone, anywhere. We offer quizzes, questions, instructional videos, and articles on a range of academic subjects, including math, biology, chemistry, physics, history, economics, finance, grammar, preschool learning, and more. We provide teachers with tools and data so they can help their students develop the skills, habits, and mindsets for success in school and beyond. Khan Academy has been translated into dozens of languages, and 15 million people around the globe learn on Khan Academy every month. As a 501(c)(3) nonprofit organization, we would love your help! Donate or volunteer today!

Donate here:

Volunteer here: …(read more)

LEARN ABOUT: Investing During Inflation

REVEALED: Best Investment During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing

Inflation is a common term in economics and refers to the rate at which prices of goods and services increase over time. In effect, inflation reduces the value of money over time. This value reduction is consistent with the nominal and real interest rates. The nominal interest rate is a percentage figure, which measures the rate at which the money invested will grow over a given period, disregarding the effects of inflation. Meanwhile, the real interest rate is the raw amount earned after inflation is factored in.

Nominal interest rates and real interest rates are distinctly different. Nominal interest rates don’t account for inflation rates, while the real interest rates do. The difference between the two is a concept known as inflation risk. However, both nominal and real interest rates are essential in determining economic conditions.

A nominal interest rate assumes that inflation doesn’t exist or won’t have a substantial impact on a particular investment. It’s the baseline of interest rates, usually referred as the quoted interest rate. Nominal rates determine the investor’s earned percentage for every dollar invested or lent without adding inflation, which means that if inflation is rarely constant or changes, the actual or real profit earned may quickly become unsatisfactory.

Real interest rates, on the other hand, directly incorporate inflation. They measure the purchasing power of the investments after accounting for inflation. The real interest rate is the nominal interest rate minus the expected inflation rate. A higher real interest rate indicates that the investment gains in purchasing power over the given period, while a lower real interest rate indicates the investment loses purchasing power.

To better understand the dynamics of nominal, real interests, and inflation, an example would suffice. For instance, let’s assume that a person borrows $1000 and promises to pay back $1100 after a year. The nominal interest rate here is 10% (1100-1000/1000*100). But then, the inflation rate is 5%, so the real interest rate is 5% (10-5). This implies that after accounting for inflation, the lender will only earn 5% on their investment.

The concept of nominal interest, real interest, and inflation calculations are an integral aspect of macroeconomic analysis. It’s imperative to understand how they work to make informed decisions on investments or financial decisions.