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

question 5

Multiple Choice

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

• A)10.00%
• B)7.50%
• C)2.50%
• D)0.75%

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Definitions:

Incremental Net Cash

The difference in net cash flows between two alternatives, emphasizing the additional cash brought in by a certain decision.

Tax Rate

The percentage at which an individual or corporation is taxed.

Incremental Net Income

The increase in net income resulting from a particular business decision or activity, compared to what it would have been without that decision or activity.

Immediate Cash Outflows

Expenses or payments that must be made in cash immediately or within a very short time frame.