Real Cash Balances

Real cash balances refer to the purchasing power of the money held by individuals or entities, taking into account the effects of inflation. In other words, it represents the actual value of cash holdings in terms of the goods and services that can be acquired with that money. Real cash balances are an important concept in economics because they provide a more accurate measure of wealth and spending power than nominal cash balances, which do not account for changes in the general price level.

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