If the Interest Rate Increases,the Opportunity Cost of Holding Money

question 163

Multiple Choice

If the interest rate increases,the opportunity cost of holding money __________,and the quantity demanded of money __________.

• A) does not change; does not change
• B) increases; also increases
• C) decreases; increases
• D) increases; decreases
• E) decreases; also decreases

---

Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one particular option is chosen.

Tax Cut

A reduction in the amount of taxes that individuals or corporations owe to the government.

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with little government intervention.

Market Equilibrium

A situation in which market supply equals market demand, so there is no incentive for price changes unless external conditions change.