People prefer to hold less of their wealth in the form of financial assets like bonds and term deposits when:
A)real GDP is at an all-time low.
B)the real interest rate is above 10 percent.
C)the price level is very low.
D)the nominal interest rate is close to zero.
E)the nominal interest rate is very high.

Question

Quizplus · Accepted Answer

When the nominal interest rate is close to zero, holding financial assets like bonds and term deposits would yield very low returns, making them unattractive to investors. Therefore, people would prefer to hold less of their wealth in the form of financial assets.

People Prefer to Hold Less of Their Wealth in the Form