In this chapter, you learned that an increase in the interest rate makes bonds more attractive, so

Question:

In this chapter, you learned that an increase in the interest rate makes bonds more attractive, so it leads people to hold more of their wealth in bonds as opposed to money. However, you also learned that an increase in the interest rate reduces the price of bonds. How can an increase in the interest rate make bonds more attractive and reduce their price?

Fantastic news! We've Found the answer you've been seeking!