Why do they say when the money supply increases does the interest rate rise? The fed does not determine the interest rate? the
The Fed does not absolutely control the interest rate. When the Fed raises its interest rates, banks will usually raise theirs so they don't lose money. But if they Fed lowers theirs (like they did at the start of the financial crisis) the banks will not necessarily lower theirs. The banks did not really want to loan at the start of the financial crisis (worried that the loans would go bad and they'd lose the money) so they didn't lower their rates.
If the supply of money increases, the interest rates really ought to go down. Did you mistype that statement?
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