The real balance effect refers to the effect that higher prices have on the value of people's money, and therefore their spending levels.

Name: The real balance effect refers to the effect that higher prices have on the value of people's money, and therefore their spending levels.
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The real balance effect, also known as the Pigou effect, suggests that as prices rise, the real value of money holdings decreases, leading to reduced consumer spending.

The Real Balance Effect Refers to the Effect That Higher