Question

Why interest rate decrease when money supply increase

Answer 1

Answer:

Explanation:

So the more people come and borrow from the bank. When supply increases the cost of money decreases @constant demand while if supply is decreased , the rate will increase. ... So, with increase in money supply, real interest rates decrease and so does nominal interest rates.

Answer 2

Answer:

Interest rates fall when the money supply increases because the fact of an increased money supply makes it more plentiful. The more plentiful the supply of money, the easier it is for businesses and individuals to get loans from banks.

Interest rates are determined by several factors, most importantly determinations made by the Federal Reserve regarding calculations and projections of inflation.

hope it helped you.....!