Demand of money falls with the rise in interest rates.
When it falls to equal the new money supply, there will be no
further difference between the amount of money people hold and the
amount they wish to hold.
This way, a decrease in the money supply raises the interest
rate.
At a nominal interest rate, the quantity of money demanded is
greater than the quantity of money supplied, which means there is
an excess demand for money.
Individuals will sell bonds to convert them into money, making
bond prices down and the interest rate up towards the
equilibrium.
Money states that the supply and demand for money and changes
in money growth over time determine the rate of inflation and
effect the interest rate changes.