If the interest rate on GICs rises from 5% to 10%,the opportunity cost of holding money will _____ and the quantity of money demanded will _____.

Question

Quizplus · Accepted Answer

When the interest rate on GICs rises from 5% to 10%, the opportunity cost of holding money increases because people can earn a higher return by investing in GICs instead of holding onto their money. This will lead to a decrease in the quantity of money demanded because people will be more willing to invest in GICs instead of holding onto their money. Therefore, the correct answer is choice letter A, increase the opportunity cost of holding money and decrease the quantity of money demanded.

If the Interest Rate on GICs Rises from 5% to 10%,the