Suppose the interest rate increases.How are opportunity cost of holding money and quantity of money demanded affected?
A) The opportunity cost of holding money increases, therefore the quantity of money demanded increases.
B) The opportunity cost of holding money increases, therefore the quantity of money demanded decreases.
C) The opportunity cost of holding money decreases, therefore the quantity of money demanded increases.
D) The opportunity cost of holding money decreases, therefore the quantity of money demanded decreases.

Question

Suppose the interest rate increases.How are opportunity cost of holding money and quantity of money demanded affected?  
A) The opportunity cost of holding money increases, therefore the quantity of money demanded increases. 
B) The opportunity cost of holding money increases, therefore the quantity of money demanded decreases. 
C) The opportunity cost of holding money decreases, therefore the quantity of money demanded increases. 
D) The opportunity cost of holding money decreases, therefore the quantity of money demanded decreases.

Quizplus · Accepted Answer

The Answer is B

Suppose the Interest Rate Increases