A decrease in the nominal interest rate would
A) encourage people to hold larger money balances.
B) encourage people to hold smaller money balances.
C) force the Fed to increase the money supply.
D) cause households to decrease consumption.

Question

Quizplus · Accepted Answer

A decrease in the nominal interest rate reduces the opportunity cost of holding money, encouraging people to hold larger money balances.

A Decrease in the Nominal Interest Rate Would