When the interest rate falls, how does the opportunity cost of holding money and the quantity of money demanded change? Nominal interest rate (percent per year) 8- 7- 6- Draw an arrow on the MD curve to show the effect of a rise in the intérest rate above 5 percent a year. Label it 1. Draw an arrow on the MD curve to show the effect of a fall 4- in the interest rate below 5 percent a year. Label it 2. 3- When the interest rate falls, other things remaining the same, the opportunity cost of holding money the and MD 2- A. falls; quantity of money demanded increases OB. rises; quantity of money demanded decreases 0- 2.6 OC. falls; demand for money increases 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 Quantity of money (trillions of dollars) OD. rises; demand for money decreases 70°F Sunny 中

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