An increase in the supply of money will decrease interest rates.

Question

Quizplus · Accepted Answer

When the supply of money increases, there is more money available to be lent out by banks and financial institutions. This leads to increased competition among lenders to attract borrowers, which results in a decrease in interest rates. Alternatively, when the supply of money decreases, lenders become more selective in choosing borrowers and interest rates tend to rise. Therefore, an increase in the supply of money will typically result in lower interest rates.

An Increase in the Supply of Money Will Decrease Interest