The real balances effect occurs because a higher price level reduces the real value of people's a. financial assets. b. wages. c. unpaid debt. d. physical investments.
Added by Robert C.
Step 1
Step 1: The real balances effect refers to the increase in purchasing power due to a decrease in the price level. Show more…
Show all steps
Your feedback will help us improve your experience
Pronoy Sinha and 66 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
The idea that higher prices reduce the purchasing power of financial assets and lead to less consumption and more saving is known as the A. Foreign purchases effect. B. Income effect. C. Aggregate demand effect. D. Real balances effect.
Haricharan G.
Which of the following will most likely result from decreases in real wages and other resource prices? A. A decrease in the nominal interest rate B. A decrease in unemployment C. A decrease in aggregate supply and real output
Jennifer S.
Which of the following accounts is considered a permanent or real account? A. Interest Revenue B. Prepaid Insurance C. Insurance Expense D. Supplies Expense
Completing the Accounting Cycle
Describe and Prepare Closing Entries for a Business
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD