The opportunity cost of holding money varies inversely with the interest rate. varies directly with the interest rate. varies inversely with the level of economic activity. s zero because money is not an economic resource.
Added by Jose Manuel M.
Step 1
If the interest rate is high, the opportunity cost of holding money (i.e., not investing it or depositing it) is also high because you are foregoing a high potential return. Conversely, if the interest rate is low, the opportunity cost of holding money is also Show more…
Show all steps
Your feedback will help us improve your experience
Chandra Jain and 98 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Investment decisions cannot be affected by Select one: a. Expected rate of return b. Interest rate c. Cost of capital goods d. None of the options are correct
Haricharan G.
Interest rates and the price of old or existing bonds are Group of answer choices There is not enough information to answer the question. sometimes directly related and sometimes inversely related. independent of each other. inversely related. directly related.
If money is not an economic resource, why is interest paid and received for its use? What considerations account for the fact that interest rates differ greatly on various types of loans? Use those considerations to explain the relative sizes of the interest rates on the following: a. A 10 -year $\$ 1000$ government bond. b. $A$ S20 pawnshop loan. c. $A 30$ -year mortgage loan on a $\$ 145,000$ house. d. $A 24$ -month $\$ 12,000$ commercial bank loan to finance the purchase of an automobile. c. $\mathrm{A} 60$ -day $\$ 100$ loan from a personal finance company.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD