Doubt

[SoniaKapoor]

If the interest elasticity of money demand is –0.1, by what percent does money demand change if the nominal interest rate rises from 2% to 3%? (a) –0.1% (b) 5% (c) 0% (d) –5%

[Arushi :))]

Interest elasticity of money demand = % change in money demand/ % change in interest rate
%change in interest rate= (.03-.02 )/ .02 x 100
                                =50
so % change in money demand would be .1x50 = 5%
There is inverse relation between interest rate and money demand so it should be d. i guess
whats the answer

[SoniaKapoor]

Thanxx arushi
the ans is d only

[Arushi :))]

Welcome :)
I love the smiley you made :D