When the opportunity cost of holding money increases, then
A) people want to hold more money.
B) people want to hold less money.
C) the nominal interest rate falls.
D) the real interest rate falls.
E) the quantity of money supplied increases.

Question

Quizplus · Accepted Answer

When the opportunity cost of holding money increases, it typically means that interest rates are higher, making it more costly to hold onto money instead of investing it or saving it in interest-bearing accounts. Therefore, people want to hold less money.

When the Opportunity Cost of Holding Money Increases, Then