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Income of Rs 100 arrives on day one and is spent evenly through the month. The average transaction demand for money is
ARs 50
BRs 100
CRs 25
DRs 10
Answer & Solution
Correct answer: A. Rs 50
1. The cash balance starts at Rs 100 and runs down evenly to Rs 0.
2. Average holding = (opening + closing) ÷ 2.
3. = (100 + 0) ÷ 2 = **Rs 50**.
4. So average transaction demand is half the monthly income. Rs 100 is the income itself, not the average balance.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.2 DEMAND FOR MONEY AND SUPPLY OF MONEY_
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