The reason that velocity increases when interest rates rise is
A. the Fed encourages banks to turn money in faster for recycling, which causes money to move faster.
B. the opportunity cost of saving increases, so people hold smaller cash balances.
C. home mortgage payments increase, so people write larger checks that reduces their checking account balances.
D. the opportunity cost of holding money increases, so average money balances decrease.
Answer: D
Economics
You might also like to view...
What are the key characteristics of a public good?
What will be an ideal response?
Economics
According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease
a. True b. False Indicate whether the statement is true or false
Economics