Question

t is costly to hold money because:

Answers:
deflation may reduce its purchasing power.

in doing so one sacrifices interest income.

bond prices are highly variable.

the velocity of money may decline

Answer 1

The correct answer is:

**in doing so one sacrifices interest income.**

Holding money often means that individuals or institutions are forgoing the ability to earn interest that could be gained through investing that money in interest-bearing accounts, bonds, or other financial instruments.