Question

Which of the following is not a factor that affects the cost of money?

a. Production opportunities

b. Time preferences for consumption

c. Risk

d. Political environment

e. Inflation

Answer 1

Answer - Option (d) Political environment is not a factor that affects the cost of money.

Reason :-

Option (a) Production opportunities affects the cost of money because increase in production opportunities in an economy increases the cost of money. Higher the production opportunities more will be the demand for money which leads to higher cost of money.

Option (b) Time preferences for consumption means the preference that consumers have to spend immediately rather than to save for future needs. Time preferences affects the cost of money beacuse If Interest rates are higher consumers would like to save instead of consumption.

Option (c) risk affects the cost of money because if risk is higher the cost of money will also be higher.

Option (e) Inflation affects the cost of money because if Inflation is higher the cost of money will also be higher.