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Real money balances

postalservice · 2010-05-07 10:39:37

Hey there, Kind of confused about what is meant by "real money balances" and "demand for real money balances". Like is it just basically money and demand for money with inflation taken into account? :confused:

07-05-2010 10:39am

#1

postalservice

Registered Users, Registered Users 2 Posts: 362 ✭✭

Join Date: June 2008

Posts: 341

Hey there,

Kind of confused about what is meant by "real money balances" and "demand for real money balances".

Like is it just basically money and demand for money with inflation taken into account?

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Comments

#2 07-05-2010 11:06am

Économiste Monétaire

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Join Date: March 2008

Posts: 2015

Money supply divided by the price level: M/P. 'Demand for real money balances' is the 'demand' side of the LM equation, with M/P being the 'supply' side. Usually, it's given by L(r,y), which means money demand is a function of the interest rate, r, and income, y.

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