Question

If the quantity of money demanded is less than the quantity of money supplied, then the interest rate will increase or decrease?

Answer 1

If the quantity of money demanded is less than the quantity of money supplied, then the interest rate will decrease.

A larger money supply tends to lower the market interest rates. A smaller money supply raises the market interest rates. The prevalent level of liquid money or supply coordinates with the total demand for liquid money or demand to determine the interest rates.