According to liquidity-preference theory, what is the opportunity cost of holding money?
A) the interest rate on bonds
B) the inflation rate
C) the cost of currency exchange
D) the difference between the inflation rate and the interest rate on bonds

Question

Quizplus · Accepted Answer

According to liquidity-preference theory, the opportunity cost of holding money is the interest rate on bonds. This is because holding money means sacrificing the potential interest income that could have been earned by investing in bonds or other interest-bearing assets.

According to Liquidity-Preference Theory, What Is the Opportunity Cost of Holding