The quantity of liquid financial assets created by the private sector is
A) an increasing function of the interest rate.
B) unrelated to the interest rate.
C) dependent on the technology for converting cash to liquid assets.
D) held constant.
E) a decreasing function of the interest rate.

Question

Quizplus · Accepted Answer

The quantity of liquid financial assets created by the private sector is a decreasing function of the interest rate because as the interest rate increases, the opportunity cost of holding liquid assets increases, so people will hold less of them.

The Quantity of Liquid Financial Assets Created by the Private