The nominal interest rate is the opportunity cost of holding wealth in money and not savings.

Question

Quizplus · Accepted Answer

The nominal interest rate represents the cost of borrowing or the return on lending, but it can also be interpreted as the opportunity cost of holding wealth in the form of money and not investing or saving it. When interest rates are high, individuals and businesses may be incentivized to save or invest rather than hold onto cash, as the opportunity cost of holding money is higher.

The Nominal Interest Rate Is the Opportunity Cost of Holding