How does money supply affect interest rates?

The money supply, or the amount of money available in an economy, can affect interest rates. When the money supply is high, interest rates tend to be low, as there is more money available for borrowing. Conversely, when the money supply is low, interest rates tend to be higher, as there is less money available for borrowing. This relationship is known as the inverse relationship between money supply and interest rates. Central banks, such as the Federal Reserve in the United States, use monetary policy tools, such as open market operations, to control the money supply and influence interest rates.