When prices fall and the cash balances that you hold in your wallet are worth more allowing you to purchase more with your money, then this explains why the aggregate demand curve is downward sloping. the effect that describes this phenomena is the: nominal income effect real balances effect interest rate effect foreign trade effect?

Question

12-11-2017
Business

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When prices fall and the cash balances that you hold in your wallet are worth more allowing you to purchase more with your money, then this explains why the aggregate demand curve is downward sloping. the effect that describes this phenomena is the: nominal income effect real balances effect interest rate effect foreign trade effect?

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Etta217 Etta217 · Answer 1 · 2017-11-23T06:44:57+01:00

It is the real balances effect. An adjustment in total consumptions on genuine generation made by the family, business, government, and outside segments that outcomes in light of the fact that an adjustment in the value level modifies the acquiring influence of cash. This is one of three impacts hidden the negative slant of the total request bend related with a development along the total request bend and an adjustment in total uses. The other two are financing cost impact and net-send out impact.