As the nominal interest rate increases, the opportunity cost of holding money_{--------------------} and the quantity of money demanded _{--------------------}. A)decreases; increases B)increases; increases C)decreases; decreases D)increases; decreases E)increases; does not change because people need money

Question

Quizplus · Accepted Answer

As the nominal interest rate increases, the opportunity cost of holding money increases because people forego higher interest earnings from other investments, leading to a decrease in the quantity of money demanded.

As the Nominal Interest Rate Increases, the Opportunity Cost of Holding