In terms of the demand for money the interest rate represents ?
Correct answer: C. The opportunity cost of holding money
- A. the rate at which current consumption can be exchanged for future consumption
- B. the price of borrowing money
- C. The opportunity cost of holding money
- D. the return on money that is saved for the future
Explanation
Holding money means giving up the interest that could have been earned by holding an interest-bearing asset, so the interest rate is the opportunity cost of holding money. It is not a return on money itself.
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