![With the help of a diagram, explain the effect of an increase in money supply on interest rate. | Homework.Study.com With the help of a diagram, explain the effect of an increase in money supply on interest rate. | Homework.Study.com](https://homework.study.com/cimages/multimages/16/instant602171091295248314.png)
With the help of a diagram, explain the effect of an increase in money supply on interest rate. | Homework.Study.com
![The Federal Reserve (Fed) expands the money supply by 5 percent. a. Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate. The Federal Reserve (Fed) expands the money supply by 5 percent. a. Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate.](https://homework.study.com/cimages/multimages/16/ques_8.1_24979638906417610986.jpg)
The Federal Reserve (Fed) expands the money supply by 5 percent. a. Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate.
![What impact will an unanticipated increase in the money supply have on the real interest rate in the short run? | Homework.Study.com What impact will an unanticipated increase in the money supply have on the real interest rate in the short run? | Homework.Study.com](https://homework.study.com/cimages/multimages/16/image_2366957645518224672.jpg)