The Opportunity Cost of Holding Money Instead of an Interest-Earning

question 38

Multiple Choice

The opportunity cost of holding money instead of an interest-earning asset is the

• A) inflation rate minus the nominal interest rate.
• B) inflation rate.
• C) inflation rate minus the real interest rate.
• D) real interest rate.
• E) nominal interest rate.

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Definitions:

GDP

Gross Domestic Product (GDP) is the total monetary or market value of all finished goods and services produced within a country's borders in a specific time period.

Deficit Spending

The practice of spending more money than is received in revenue, typically referring to government spending that exceeds its receipts.

Opportunity Cost

The expense incurred by not selecting the second best choice while making a decision or opting among alternatives.

Debt Default

The failure to meet the legal obligations of a loan, such as not making scheduled payments on time.