Question

An increase in the interest rate

Answer 1

Answer:

D. decreases the demand for money.

Step-by-step explanation:

Money demand and interest rate has an inverse relationship.

An increase in the interest rate decreases the demand for money. An increase in the price of bonds results in a lower interest rate.

When the interest rate increases, an individual's opportunity cost for holding his money increases. In this condition, the person chooses to hold more bonds, thereby demanding less money.