A 10% decrease in real income usually leads to ________ in money demand.

Question

Quizplus · Accepted Answer

A 10% decrease in real income would lead to a decrease in money demand, but the decrease would be less than 10%. This is because people would likely reduce their spending in response to the decrease in income, but not by the full 10% as they may still have some essential expenses that they cannot cut back on. Therefore, the decrease in money demand would be less than the decrease in income.

A 10% Decrease in Real Income Usually Leads to ________