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Real money balance refers to the amount of money held by individuals or entities adjusted for inflation, reflecting its purchasing power. It is typically measured by dividing nominal money balances (like cash and deposits) by the price level, often represented by a price index. This concept helps in understanding the real value of money in terms of the goods and services it can buy, rather than just its face value. Real money balances are important in economic analysis, particularly in the context of monetary policy and consumer behavior.

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4mo ago

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