If the income elasticity of money demand is 3/4 and income increases 8%,by about how much does the price level change?

Name: If the income elasticity of money demand is 3/4 and income increases 8%,by about how much does the price level change?
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Question

Quizplus · Accepted Answer

The price level falls by 6% because the income elasticity of money demand is 3/4, meaning money demand increases by 6% (3/4 of 8%). If money supply is unchanged, the price level must decrease to balance the increased demand for money.

If the Income Elasticity of Money Demand Is 3/4 and Income