The opportunity cost of holding money instead of an interest-earning asset is the
A) inflation rate minus the nominal interest rate.
B) inflation rate.
C) inflation rate minus the real interest rate.
D) real interest rate.
E) nominal interest rate.

Question

Quizplus · Accepted Answer

The opportunity cost of holding money instead of an interest-earning asset is the nominal interest rate, as this represents the foregone interest earnings by not investing in an interest-bearing asset.

The Opportunity Cost of Holding Money Instead of an Interest-Earning