When the Short-Term Interest Rate _____, the Opportunity Cost of Holding

question 301

Multiple Choice

When the short-term interest rate _____, the opportunity cost of holding money _____, and the quantity of money individuals want to hold _____.

• A) falls; falls; falls
• B) falls; falls; rises
• C) rises; falls; falls
• D) rises; falls; rises

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Definitions:

Diminishing Marginal Utility

The principle that says the additional satisfaction a consumer gains from consuming one more unit of a good or service will lessen with each additional unit consumed.

Marginal Utility

Marginal utility is the additional satisfaction or utility that a consumer derives from consuming one more unit of a good or service.

Marginal Utility

This term refers to the additional satisfaction or utility gained by consuming one more unit of a good or service.

Rational Consumer

An economic theory assumption that consumers make purchasing decisions based on their rational outlook, available information, and self-interest to maximize utility.