What Does The Previous Analysis Suggest About The Market For Money?

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What Does The Previous Analysis Suggest About The Market For Money?

g to decide whether to put the $10,000 in a non-interest -bearing checking account so that you can use it whenever you want (that is, hold it as money) or to use it to buy a U.S. Treasury bond. Suppose the interest rate on the bond is 6% per year. What would be the opportunity cost of holding the $10,000 as money? Now, suppose that the interest rate rose to 11% per year. This would cause the opportunity cost of holding the $10,000 as money to _____ to _____ per year. What does the previous analysis suggest about the market for money?
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$600 per year increase/$1,100 The quantity of money demanded decreases as the interest rate rises.
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