The real-balances effect indicates that inflation makes the public feel wealthier and they therefore spend more out of their current incomes.

Name: The real-balances effect indicates that inflation makes the public feel wealthier and they therefore spend more out of their current incomes.
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Question

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The real-balances effect suggests that inflation erodes the purchasing power of money, making people feel less wealthy, leading them to spend less, not more.

The Real-Balances Effect Indicates That Inflation Makes the Public Feel