Final answer:
The statement regarding the real-balances effect is false. In reality, inflation reduces the purchasing power of savings, making people feel less wealthy and decreasing their consumption spending.
Step-by-step explanation:
The statement that the real-balances effect indicates that inflation makes the public feel wealthier and they therefore spend more out of their current incomes is false. The correct concept is known as the wealth effect, which holds that as the price level increases, the buying power of money in savings accounts and other assets is eroded by inflation. This generally leads to a decrease in consumption spending as people feel less wealthy, contrary to feeling wealthier. Inflation can also cause unintended redistributions of buying power, impacting people and markets in various ways that are often perceived as unfair.