Suppose that a person's yearly income is $60,000. Also suppose that this person's money demand function is given by M = $Y(0.35-i) Suppose that the interest rate is 15%. The percentage change in this person's demand for money if her yearly income falls by 50% is %. Suppose that the interest rate is 10%. The percentage change in this person's demand for money if her yearly income falls by 50% is %. Which of the following statements best describes the effect of income on money demand? O A. any decrease (increase) in income leads to a proportional decrease (increase) in money demand regardless of the interest rate. O B. Any decrease (increase) in income leads to a more than proportional increase (decrease) if money demand is low. O C. Any decrease (increase) in income leads to a less than proportional increase (decrease) if money demand is high. OD. Changes in income do not impact the demand for money.

Suppose that a person's yearly income is $60,000. Also suppose that this person's money demand function is given by M = $Y(0.35-i) Suppose that the interest rate is 15%. The percentage change in this person's demand for money if her yearly income falls by 50% is %. Suppose that the interest rate is 10%. The percentage change in this person's demand for money if her yearly income falls by 50% is %. Which of the following statements best describes the effect of income on money demand? O A. any decrease (increase) in income leads to a proportional decrease (increase) in money demand regardless of the interest rate. O B. Any decrease (increase) in income leads to a more than proportional increase (decrease) if money demand is low. O C. Any decrease (increase) in income leads to a less than proportional increase (decrease) if money demand is high. OD. Changes in income do not impact the demand for money.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 1SQP

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