Question

Why does a high money supply cause a low rate of interest?

Answer 1

Conversely, smaller money supplies tend to raise market interest rates. The current level of liquid money (supply) coordinates with the total demand for liquid money (demand) to help determine interest rates. ... By the law of supply, the interest rates charged to borrow money tend to be lower when there is more of it.

Answer 2

Conversely, smaller money supplies tend to raise market interest rates. The current level of liquid money (supply) coordinates with the total demand for liquid money (demand) to help determine interest rates. ... By the law of supply, the interest rates charged to borrow money tend to be lower when there is more of it.