CA Foundation · Business Economics · Money Market
A household's income rises from ₹40,000 to ₹50,000 per month. If its transactions demand for money is a constant 25% of income, by how much does its transactions demand for money increase?
The transactions demand rises by ₹2,500. At 25% of income, demand goes from ₹10,000 to ₹12,500 when income moves from ₹40,000 to ₹50,000. The increase equals 25% of the ₹10,000 rise in income.
- A₹2,500Correct
- B₹10,000
- C₹12,500
- D₹1,250
Explanation
Initial demand is 25% of 40,000 = ₹10,000. New demand is 25% of 50,000 = ₹12,500. The increase is ₹2,500, which equals 25% of the ₹10,000 rise in income. ₹12,500 is wrong because it is the new level, not the change.
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