What happens to the demand for money when interest rates increase?

When interest rates increase, the demand for money usually goes down. This happens because higher interest rates make it more expensive to borrow money and less attractive to hold onto cash. People and businesses may prefer to invest their money in savings accounts or bonds that earn interest instead of keeping it as cash. For example, if the interest rate rises from 2% to 5%, someone might choose to put their money in a bank to earn that extra interest rather than keeping it in their wallet. As a result, when interest rates rise, people want less cash on hand and are more likely to save or invest their money instead.