Question

When the interest rate falls​, other things remaining the​ same, the opportunity cost of holding money​ ______ and​ ______.

A.falls​; the quantity of money demanded increases
B.rises​; the demand for money decreases
C.falls​; the demand for money increases
D.rises​; the quantity of money demanded decreases

Answer 1

In the context of financial markets, a fall in interest rates reduces the opportunity cost of holding money, leading to an increased quantity of money demanded.

Step-by-step explanation:

When the interest rate falls, other things remaining the same, the opportunity cost of holding money falls and the quantity of money demanded increases. Therefore, the answer is A: falls; the quantity of money demanded increases. This follows the law of demand and supply in financial markets, asserting that lower interest rates decrease the opportunity cost of holding money, leading to an increased demand for money.