If the interest rate rises, people will want to hold fewer bonds, meaning the demand for money shifts to the right.

Question

Quizplus · Accepted Answer

When the interest rate rises, the cost of borrowing money increases, which typically reduces the amount of money people want to hold for transactions and speculative purposes, leading to a leftward shift in the money demand curve, not a shift to the right. Additionally, higher interest rates make bonds more attractive due to higher returns, affecting the demand for money, not directly altering the demand for bonds in the context provided.

If the Interest Rate Rises, People Will Want to Hold