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6 November, 07:56

If the demand for real money balances is proportional to real income, velocity will:

a. remain constant.

b. vary directly with the interest rate.

c. increase as income increases.

d. increase as income decreases.

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Answers (1)
  1. 6 November, 08:22
    0
    If the demand for real money balances is proportional to real income, velocity will: a. remain constant.

    Explanation:

    Real money balance is the amount of money left with the person or the amount that is circulated in the economy. In simple, the money held for purchasing the goods.

    The demand for real money balances increases with the increase in real income. The real money balance shows the purchasing power of an individual for the product or services.

    Velocity of money refers to the exchange rate of money in the economy. The velocity of money remains constant, when the demand for real money balances is relatively proportional to real income.
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Home » Business » If the demand for real money balances is proportional to real income, velocity will: a. remain constant. b. vary directly with the interest rate. c. increase as income increases. d. increase as income decreases.
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