Question:
When does the opportunity cost of holding money decrease or increase, and how does people's desire to hold money change?
a. The opportunity cost of holding money decreases when the interest rate increases, so people desire to hold more money.
b. The opportunity cost of holding money decreases when the interest rate increases, so people desire to hold less money.
c. The opportunity cost of holding money increases when the interest rate increases, so people desire to hold more money.
d. The opportunity cost of holding money increases when the interest rate increases, so people desire to hold less money.
Opportunity Cost:
In the context of economics, the opportunity cost of a chosen alternative is defined as the net gains associated with the second best alternative forsaken. The economic cost of a decision is ascertained by deducting both the actual and opportunity costs from the sales revenue.
Answer and Explanation:1
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The correct answer to the given question is option d. The opportunity cost of holding money increases when the interest rate increases, so people...
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