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About
Snippet
Money
is
like
other
goods:
the
higher
the
opportunity
cost,
the
less
of
it
we
want
to
hold.
Consider,
first,
how
the
transactions'
demand
for
money
(i.e.,
the
money
held
to
facilitate
purchases
of
goods
and
services)
is
affected
by
higher
interest
rates.
When
the
opportunity
cost
of
money
is
high,
we
lose
interest
by
holding
more
of
it,
so
we
find
ways
to
hold
less.
For
example,
if
interest
rates
are
high
enough,
we
might
reduce
the
funds
in
our
pockets
and
in
our
bank
accounts
and
take
funds
out
of
interest-bearing
mutual
funds
in
smaller
amounts
more
frequently.
The replay is still saving.