According to liquidity preference theory, what is the opportunity cost of holding money?
A)the interest rate on bonds
B)the inflation rate
C)the cost of converting bonds to a medium of exchange
D)the difference between the inflation rate and the interest rate on bonds

Question

Quizplus · Accepted Answer

According to liquidity preference theory, the opportunity cost of holding money is the interest rate on bonds. Holding money means sacrificing the opportunity to earn interest on bonds or other interest-bearing assets. Therefore, the best choice is A.

According to Liquidity Preference Theory, What Is the Opportunity Cost