The opportunity cost of holding money increases when the
A)purchasing power of money increases.
B)nominal interest rate rises.
C)price of goods and services decrease.
D)income of consumers increases.
E)income of consumers decreases.

Question

Quizplus · Accepted Answer

The opportunity cost of holding money is the interest that could have been earned if the money had been invested. When the nominal interest rate rises, the opportunity cost of holding money also increases, as it becomes more lucrative to invest money rather than holding onto it.

The Opportunity Cost of Holding Money Increases When the