With the increase in Money supply, the nominal interest rate tends to increase. But what happens if the supply of money is fixed? What happens to the Interest Rate?

  • $\begingroup$ Not really sure if I agree with your premise. The creation of new money or credit would increase the supply of credit which would drive down the price of borrowing which is by definition what interest rates are. With a fixed money supply, the interest rate would reflect society's preference for saving or spending. It could go up or down. $\endgroup$ – Queue Mann Mar 11 at 19:27

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