How is the opportunity cost of holding money measured?
A) by the interest rate
B) by the liquidity lost due to holding money
C) by the money supply curve
D) by the inflation rate

Question

How is the opportunity cost of holding money measured?  
A) by the interest rate 
B) by the liquidity lost due to holding money 
C) by the money supply curve 
D) by the inflation rate

Quizplus · Accepted Answer

The opportunity cost of holding money is measured by the interest rate. When money is held instead of being invested or spent, it loses potential interest or investment earnings. Therefore, the cost of holding money is the foregone interest that could have been earned on an investment or deposit.

How Is the Opportunity Cost of Holding Money Measured