How Does an Increase in the Short-Term Interest Rate Affect

Multiple Choice

How does an increase in the short-term interest rate affect peoples' desire to hold real money balances?

A) People will hold more money to compensate for the higher interest rate.
B) People will hold more money in anticipation of higher inflation.
C) People will hold less money since they would be sacrificing more interest by holding money.
D) People will hold less money since it is not worth as much.