How does the money supply affect interest rates?

The money supply, or the total amount of money in circulation in an economy, can affect interest rates in several ways. An increase in the money supply can lead to a decrease in interest rates, as there is more money available for borrowing and lending. This can make borrowing cheaper for businesses and individuals, leading to increased spending and economic growth. Conversely, a decrease in the money supply can lead to an increase in interest rates, as there is less money available for borrowing and lending, making borrowing more expensive and slowing economic growth. The relationship between money supply and interest rates is known as the relationship between money supply and interest rates.