A decrease in the nominal interest rate _________the opportunity cost of holding money.
A) increases
B) can increase or decrease
C) decreases
D) None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money.

Question

Quizplus · Accepted Answer

The opportunity cost of holding money refers to the foregone interest that could have been earned by investing the money instead. Therefore, a decrease in the nominal interest rate reduces the potential return from investing and, as a result, decreases the opportunity cost of holding money.

A Decrease in the Nominal Interest Rate _________The Opportunity Cost