t is costly to hold money because:

Question

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.