If nominal interest rates are high, you:
A) hold only cash.
B) hold less savings and more cash.
C) hold all your money in a different currency.
D) never have any cash in your checking account.
E) hold less cash and more savings.

Question

Quizplus · Accepted Answer

When nominal interest rates are high, it becomes more attractive to save money instead of holding onto cash. This is because the return on savings is higher, so individuals are incentivized to save more and hold onto less cash. Therefore, the best choice is to hold less cash and more savings (option E).

If Nominal Interest Rates Are High, You