Higher interest rates ____ the ____ cost of holding currency and therefore reduce the quantity of currency demanded.A) decrease;opportunityB) increase;transactionC) decrease;transactionD) increase;opportunity

Question

Tyliah Stokes · Accepted Answer

Final Answer : D, Explanation :  Higher interest rates increase the opportunity cost of holding currency because individuals and businesses forego the interest they could have earned by holding interest-bearing assets instead. Therefore, as the opportunity cost rises, the quantity of currency demanded typically decreases.

Higher interest rates the cost of holding currency and therefore reduce the quantity of currency demanded.

A) decrease;opportunity
B) increase;transaction
C) decrease;transaction
D) increase;opportunity

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