Suppose that prices fall by 50 per cent and nominal incomes fall by 50 per cent. We would expect:

Name: Suppose that prices fall by 50 per cent and nominal incomes fall by 50 per cent. We would expect:
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If both prices and nominal incomes fall by 50 per cent, the purchasing power of money or real income remains unchanged. Therefore, the demand for real balances (money adjusted for price level) would remain unchanged, as people's ability to buy goods and services has not altered.

Suppose That Prices Fall by 50 Per Cent and Nominal