If the income elasticity of money demand is 3/4,by what percent does money demand rise if income rises 10%?

Question

Quizplus · Accepted Answer

Income elasticity of money demand is the percentage change in money demand due to a percentage change in income. Here, income elasticity of money demand is given as 3/4 which means that a 1% increase in income results in a 0.75% increase in money demand.
So, a 10% increase in income will result in a (10% x 0.75) = 7.50% increase in money demand. Therefore, the answer is B) 7.50%.

If the Income Elasticity of Money Demand Is 3/4,by What