The opportunity cost of holding money increases when
A) the purchasing power of money rises.
B) the nominal interest rate rises.
C) the price level falls.
D) consumers' real incomes increase.

Question

Quizplus · Accepted Answer

The opportunity cost of holding money increases when the nominal interest rate rises because individuals forego the interest they could have earned by investing or saving their money instead of holding onto it as cash.

The Opportunity Cost of Holding Money Increases When