When nominal interest rates rise on financial assets such as U.S.Treasury bills,the amount of interest that households and firms
A) gain by holding money increases.
B) lose by holding money decreases.
C) lose by holding money increases.
D) lose or gain by holding money does not change.

Question

Quizplus · Accepted Answer

When nominal interest rates rise on financial assets, the opportunity cost of holding money increases. Therefore, households and firms will lose by holding money, as they could have earned a higher return by investing in financial assets.

When Nominal Interest Rates Rise on Financial Assets Such as U.S.Treasury