A decrease in the interest rate reduces the opportunity cost of holding money.

Name: A decrease in the interest rate reduces the opportunity cost of holding money.
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Question

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When the interest rate decreases, the return on holding money decreases as well, making it less costly to hold money and increasing the incentive to spend it or invest it elsewhere. Therefore, a decrease in the interest rate reduces the opportunity cost of holding money.

A Decrease in the Interest Rate Reduces the Opportunity Cost