Discussion
The opportunity cost of holding money is called as :
Answer: A
The opportunity cost of holding money is the nominal interest rate.
Money (cash and most current deposits) earns little or no interest. By holding wealth as money instead of bonds, a person gives up the nominal interest the bonds would have paid. That forgone return is the opportunity cost, which is why money demand falls as the nominal interest rate rises.
Inflation reduces the real value of money, but the relevant comparison is with bonds, whose nominal return already includes expected inflation. The real return on investment and savings are not the cost of holding money as such.
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