Real Money Balances Equal The

question 28

Multiple Choice

Real money balances equal the:

• A) sum of coin, currency, and balances in checking accounts.
• B) amount of money expressed in terms of the quantity of goods and services it can purchase.
• C) number of dollars used as a medium of exchange.
• D) quantity of money created by the Federal Reserve.

---

Definitions:

Substitution Effect

The change in consumption patterns due to a change in relative prices, holding the consumer's utility level constant.

Income Effect

The change in an individual's consumption choices resulting from a change in real income, due to changes in price.

Optimal Consumption Bundle

The mix of products and services that optimizes a buyer's satisfaction within their spending limit.

Cappuccino

A coffee drink made with espresso, hot milk, and steamed milk foam, often served with a sprinkle of cocoa powder or cinnamon on top.