When the Interest Rate Increases, How Do the Opportunity Cost

question 73

Multiple Choice

When the interest rate increases, how do the opportunity cost of holding money and the quantity of money demanded change?

• A) The opportunity cost of holding money increases, so the quantity of money demanded increases.
• B) The opportunity cost of holding money increases, so the quantity of money demanded decreases.
• C) The opportunity cost of holding money decreases, so the quantity of money demanded increases.
• D) The opportunity cost of holding money decreases, so the quantity of money demanded decreases.

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Definitions:

Buying Decision

A Buying Decision is the conclusion reached by consumers or organizations after evaluating information and alternatives, leading to the purchase of a product or service.

High-involvement

Refers to purchase decisions where the consumer engages in extensive research and considers a significant amount of information before making a decision.

Preconscious

A part of the mind that contains thoughts, memories, and feelings that are not actively in conscious awareness but can be easily brought to mind.

Negative Impression

A detrimental or unfavorable opinion formed in someone's mind based on an interaction, information, or experience.