The real balance effect is the change in
A) purchasing power that results from a change in income.
B) the amount of money one has that results from a change in income.
C) purchasing power that results from a change in the price level.
D) the amount of money one has that results from a change in the price level.
E) none of the above

Question

Quizplus · Accepted Answer

The real balance effect refers to the change in purchasing power that results from a change in the price level. As the price level increases, the purchasing power of money decreases, and vice versa. This can affect consumption and saving decisions by consumers, and can also impact the overall performance of the economy. The other options are not associated with the real balance effect.

The Real Balance Effect Is the Change in