When the nominal interest rate falls, the opportunity cost of holding money
A) decreases and the demand for money curve shifts rightward.
B) increases and there is a movement upward along the demand for money curve.
C) decreases and the demand for money curve shifts leftward.
D) increases and the demand for money curve shifts rightward.
E) decreases and there is a movement downward along the demand for money curve.

Question

Quizplus · Accepted Answer

When the nominal interest rate falls, the opportunity cost of holding money decreases, leading to a movement downward along the demand for money curve as people are more willing to hold money rather than invest it.

When the Nominal Interest Rate Falls, the Opportunity Cost of Holding