When nominal interest rates on financial assets are high,the opportunity cost of holding money is ________,so the quantity of money demanded by households and firms will be ________.
A) high; high
B) high; low
C) low; high
D) low; low

Question

Quizplus · Accepted Answer

When nominal interest rates on financial assets are high, people tend to hold less money because the opportunity cost of holding money (which earns zero interest) is high. As a result, the quantity of money demanded by households and firms will be low. Therefore, option B is the correct answer.

When Nominal Interest Rates on Financial Assets Are High,the Opportunity