The change in the purchasing power of dollar-denominated assets (such as cash holdings)is the
A) money effect.
B) interest rate effect.
C) asset effect.
D) real balance effect.
E) none of the above

Question

Quizplus · Accepted Answer

The change in the purchasing power of dollar-denominated assets, including cash holdings, is the real balance effect. This effect refers to the change in the real value of money balances as a result of inflation or changes in nominal income. As the price level increases, the real value of money holdings decreases, leading to a reduction in the overall purchasing power of the assets. Therefore, the correct answer is D.

The Change in the Purchasing Power of Dollar-Denominated Assets (Such