A rise in price lowering the real value of cash balances is known as
The Pigou effect is the real-balance effect linking the purchasing power of money balances to consumption. A rise in prices reduces real balances and can reduce consumption,…
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A rise in price lowering the real value of cash balances is known as
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Correct answer A
The Pigou effect is the real-balance effect linking the purchasing power of money balances to consumption. A rise in prices reduces real balances and can reduce consumption, while a fall in prices works in the opposite direction.
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Tamil Nadu SET (TNSET)