People Choose to Hold a Smaller Quantity of Money If​

question 194

Multiple Choice

People choose to hold a smaller quantity of money if​

• A)​the interest rate increases,which causes the opportunity cost of holding money to increase.
• B)​the interest rate increases,which causes the opportunity cost of holding money to decrease.
• C)​the interest rate decreases,which causes the opportunity cost of holding money to increase.
• D)​the interest rate decreases,which causes the opportunity cost of holding money to decrease.

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Definitions:

Opportunity Cost

The cost of foregone alternatives when one option is chosen over another.

Production Possibilities Curve

A graphical representation showing the maximum combination of goods and services that can be produced from a fixed set of resources.

Bowed Outward

A description of a production possibility frontier that demonstrates the increasing opportunity cost of producing one good over another.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to invest in one option over others.