When the interest rate falls, how does the opportunity cost ofholding money and the quantity of money demanded change?Nominal interest rate (percent per year)87-1Draw an arrow on the MD curve to show the effect of a risein the intérest rate above 5 percent a year. Label it 1.5-Draw an arrow on the MD curve to show the effect of a fallin the interest rate below 5 percent a year. Label it 2.4-3-When the interest rate falls, other things remaining thesame, the opportunity cost of holding moneyandMDtheO A. falls; quantity of money demanded increasesB. rises; quantity of money demanded decreases3.0C. falls; demand for money increases2.62.72.82.93.03.1 3.23.33.4Quantity of money (trillions of dollars)OD. rises; demand for money decreases70°FSunny

Interest rates are defined as the form of reward given to the investors for investing their money…

When the interest rate falls, how does the opportunity cost of holding money and the quantity of money demanded change? Nominal interest rate (percent per year) 8- 7- 6- Draw an arrow on the MD curve to show the effect of a rise in the intérest rate above 5 percent a year. Label it 1. Draw an arrow on the MD curve to show the effect of a fall 4- in the interest rate below 5 percent a year. Label it 2. 3- When the interest rate falls, other things remaining the same, the opportunity cost of holding money the and MD 2- A. falls; quantity of money demanded increases OB. rises; quantity of money demanded decreases 0- 2.6 OC. falls; demand for money increases 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 Quantity of money (trillions of dollars) OD. rises; demand for money decreases 70°F Sunny 中

When the interest rate falls, how does the opportunity cost of holding money and the quantity of money demanded change? Nominal interest rate (percent per year) 8- 7- 6- Draw an arrow on the MD curve to show the effect of a rise in the intérest rate above 5 percent a year. Label it 1. Draw an arrow on the MD curve to show the effect of a fall 4- in the interest rate below 5 percent a year. Label it 2. 3- When the interest rate falls, other things remaining the same, the opportunity cost of holding money the and MD 2- A. falls; quantity of money demanded increases OB. rises; quantity of money demanded decreases 0- 2.6 OC. falls; demand for money increases 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 Quantity of money (trillions of dollars) OD. rises; demand for money decreases 70°F Sunny 中

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

When the interest rate falls, how does the opportunity cost of
holding money and the quantity of money demanded change?
Nominal interest rate (percent per year)
8
7-
1
Draw an arrow on the MD curve to show the effect of a rise
in the intérest rate above 5 percent a year. Label it 1.
5-
Draw an arrow on the MD curve to show the effect of a fall
in the interest rate below 5 percent a year. Label it 2.
4-
3-
When the interest rate falls, other things remaining the
same, the opportunity cost of holding money
and
MD
the
O A. falls; quantity of money demanded increases
B. rises; quantity of money demanded decreases
3.0
C. falls; demand for money increases
2.6
2.7
2.8
2.9
3.0
3.1 3.2
3.3
3.4
Quantity of money (trillions of dollars)
OD. rises; demand for money decreases
70°F
Sunny

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