Sort the following items into bins depending on their effect on the opportunity

Question

Sort the following items into bins depending on their effect on the opportunity cost of holding cash. If the item would have no effect on the opportunity cost of holding cash, please leave this unplaced. Increases opportunity cost of holding cash Decreases opportunity cost of holding cash Short term interest rates increase. Deandra starts buying all her produce from the farmers market. They don't take credit cards. JR receives a raise. Inflation increases. Pick -pocketing is on the rise! ATM's appear on every corner.

Explanation / Answer

The following items increase the opportunity cost of holding cash:

a) Short term rates increase:- People would be more inclined to make savings and earn interest.

b) Pick pocketing is on the rise.

c) ATMs appear on every corner.

The following items decrease the opportunity cost of holding cash:

a) Inflation increases (This will also increase the demand of money).

b) Deandra starts buying all her produce from the farmer

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