Routledge Dictionary of Economics, Second Edition
The effect on consumption of a change in the real value of cash balances brought about by a change in the money supply, e.g.
an increase in the money supply which causes a rise in prices, a reduction in the purchasing power of cash balances which results in lower consumption. Diagrammatically, this effect can be shown as a shift in the IS curve. Also known as the ‘real balance effect’.
See also: IS-LM curves
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