production opportunities
risk
all of above
inflation
Answer is Right!
Answer is Wrong!
The correct answer is: C. all of the above
The cost of money is the price that borrowers pay for loans, and the return that lenders expect on their investments. It is affected by a number of factors, including:
- Production opportunities: The cost of money is higher when there are more profitable investment opportunities available. This is because investors are willing to pay more for money when they can earn a higher return on their investment.
- Risk: The cost of money is higher when there is more risk involved in the investment. This is because investors demand a higher return to compensate them for the risk they are taking.
- Inflation: The cost of money is higher when inflation is higher. This is because inflation erodes the purchasing power of money, so borrowers need to pay more to get the same amount of goods and services in the future.
In addition to these factors, the cost of money can also be affected by government policies, such as interest rates and taxes.