The notion that the money in your possession will buy less when the price rises is provided as the explanation for

Question

Quizplus · Accepted Answer

The real-balances effect is the notion that as the price level rises, the purchasing power of money decreases, causing consumers to reduce their quantity demanded. This is due to the fact that the amount of money held by consumers, also known as real balances, buys fewer goods and services at higher prices.

The Notion That the Money in Your Possession Will Buy