If the interest rate rises from 1 per cent to 3 per cent,the ________ decreases and the opportunity cost of holding money ________.
A)quantity of money demanded;rises
B)quantity of money demanded;falls
C)quantity of money supplied;falls
D)quantity of money supplied;rises
E)demand for money;rises

Question

Quizplus · Accepted Answer

When interest rates rise, the quantity of money demanded decreases because people prefer to invest in interest-bearing assets rather than hold onto cash. The opportunity cost of holding money rises because the potential earnings from interest-bearing investments increase.

If the Interest Rate Rises from 1 Per Cent to 3