Question

The opportunity cost of holding money: a. decreases when the interest rate increases, so people desire to hold more of it. b. decreases when the interest rate increases, so people desire to hold less of it. c. increases when the interest rate increases, so people desire to hold more of it. d. increases when the interest rate increases, so people desire to hold less of it.

Answer 1

Answer:

The correct option is D

Explanation:

The opportunity cost of holding money is the cost of money in the hands of the investor rather than investing it. The trade-off  among money holding  money investing grounded on the other things like the interest rate which can be earned by investing.

So, it will increase when the rate of interest is increasing and people desire to hold less amount.