Question

An increase in income:

a. Increases money demand as people have more purchasing power.
b. Decreases money demand as people rely on credit for spending.
c. Has no effect on money demand.
d. Increases money demand due to higher savings.

Answer 1

An increase in income will increase money demand as people have more purchasing power.

Step-by-step explanation:

An increase in income will increase money demand as people have more purchasing power. When individuals have higher incomes, they have more money available to spend. This leads to an increase in the demand for money, as they need more cash for their increased spending.