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Real Money Balances Equal The

Real Money Balances Refers To Two

. The demand for money. A model of real money balances and interest rates. A model of real money balances, interest rates and exchange rates. Long run effects of changes in money on prices, interest rates and exchange rates. Mankiw defines real money balances, M P, to be the quantity of goods and services a given amount of money can buy. On page 88 of Macroeconomics 7th edition, he illustrates the concept with the following example: Real money balances measure the purchasing power of the stock of money. For example, consider an economy that produces only bread.