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An increase in the U.S. interest rate

A. raises the opportunity cost of holding dollars.
B. shifts money demand to the right.
C. induces households to increase consumption.
D. leads to a depreciation of the U.S. dollar.

Answer :

BenitoMarin BenitoMarin

Today at 10:08 PM

Answer:

The correct answer is letter "A": raises the opportunity cost of holding dollars.

Explanation:

An interest rate is the cost of borrowing money or the compensation for assuming the risks for lending money. Interest is a cost for one party and income for another. As interest rates increase, people will tend to spend less money so, by keeping it saved, the money earns more value as a form of interest.

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