According to the liquidity preference theory of interest, the rate of interest is determined by the demand for money and the supply of money. When the supply of money is fixed, an increase in the demand for money (liquidity preference) means that individuals and institutions want to hold more money. To do this, they will try to sell assets like bonds. This increased selling pressure drives down bond prices and consequently raises their yield, which is the rate of interest. Therefore, an increase in the demand for money with a constant supply leads to a higher rate of interest.