Higher interest rates ____ the ____ cost of holding currency and therefore reduce the quantity of currency demanded.

Question

Quizplus · Accepted Answer

Higher interest rates increase the opportunity cost of holding currency because individuals and businesses forego the interest they could have earned by holding interest-bearing assets instead. Therefore, as the opportunity cost rises, the quantity of currency demanded typically decreases.

Higher Interest Rates ____ the ____ Cost of Holding Currency

Higher Interest Rates the Cost of Holding Currency