If during 2007 the interest rate on one-month Treasury bills was 2.5% and during 2008 it was 2%, the opportunity cost of holding money:
A)decreased.
B)became negative.
C)increased.
D)did not change.

Question

Quizplus · Accepted Answer

The opportunity cost of holding money is the potential return that could be earned by investing that money elsewhere. As the interest rate on one-month Treasury bills decreased from 2.5% in 2007 to 2% in 2008, the potential return on investing in Treasury bills decreased. This means that the opportunity cost of holding money decreased, making it less costly to hold onto money instead of investing it. Therefore, the correct answer is A) decreased.

If During 2007 the Interest Rate on One-Month Treasury Bills