When an economist says that the opportunity cost of holding cash has risen, this implies that interest rates are higher than they used to be the demand for money curve has shifted to the left people will prefer to hold more li

When an economist says that the opportunity cost of holding cash has risen, this implies that interest rates are higher than they used to be the demand for money curve has shifted to the left people will prefer to hold more li

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 1.2P

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

When an economist says that the opportunity cost of holding cash has risen, this implies that

interest rates are higher than they used to be

the demand for money curve has shifted to the left

people will prefer to hold more liquid assets

the "price" of cash money has fallen

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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