Provide an explanation of how the Supply-Demand Theory of Interest Rate Determination would expect rates to perform if market conditions are impacted by an increasing money supply. Consider the three conditions of the Demand performance (stay-the-same, increase, decrease) when considering the dollar level change in Supply; then, a reference to the growth change to both Supply and Demand.

Interest rate can be considered as the cost of borrowing money. Or, we can say it is the compensation for the service and risk of lending money. Because here one wntity riski g their money so obviously they should get a return for that. In both cases it keeps the economy moving by encouraging people to borrow, to lend, and to spend.

  Interest rate levels will definitely affect supply and demand of money in the econmomy . Increase in the demand for money or credit will raise interest rates, while a decrease in the demand for credit will decrease them. So these are co related. An increase in the amount of money made available to borrowers increases the supply of credit.