People choose to hold a smaller quantity of money if
A)the interest rate increases,which causes the opportunity cost of holding money to increase.
B)the interest rate increases,which causes the opportunity cost of holding money to decrease.
C)the interest rate decreases,which causes the opportunity cost of holding money to increase.
D)the interest rate decreases,which causes the opportunity cost of holding money to decrease.

Question

People choose to hold a smaller quantity of money if​
A)​the interest rate increases,which causes the opportunity cost of holding money to increase.
B)​the interest rate increases,which causes the opportunity cost of holding money to decrease.
C)​the interest rate decreases,which causes the opportunity cost of holding money to increase.
D)​the interest rate decreases,which causes the opportunity cost of holding money to decrease.

Quizplus · Accepted Answer

When the interest rate increases, the opportunity cost of holding money increases because the individual can earn a higher return by investing in interest-bearing assets. Therefore, individuals are incentivized to hold a smaller quantity of money and invest in these assets instead.

People Choose to Hold a Smaller Quantity of Money If​

People Choose to Hold a Smaller Quantity of Money If