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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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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