The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Real Balances

  • Don Patinkin
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1869

Abstract

By the term ‘real balances’ is meant the real value of the money balances held by an individual or by the economy as a whole, as the case may be. The emphasis on real, as distinct from nominal, reflects the basic assumption that individuals are free of ‘money illusion’. It is a corresponding property of any well-specified demand function for money that its dependent variable is real balances. Indeed, Keynes in his Treatise on Money (1930, vol. 1, p. 222) designated the variation on the Cambridge equation that he had presented in his A Tract on Monetary Reform (1923, ch. 3: 1) as ‘The “Real-Balances” Quantity Equation’.

JEL Classifications

E5 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Don Patinkin
    • 1
  1. 1.