Why does the interest rate go down when the quantity of money supplied increases?What is the practical explanation for interest rate to be a...

A simple explanation for the decrease in interest rates
with an increase in money supply is that the price of all products reaches an
equilibrium which is dependent on the supply and the demand of the
product.

The rate of interest can considered to be the
price of money. As with any other product, a relative increase in supply of the product
for the same demand leads to a decrease in the
price.

Lenders like banks or other financial institution,
first need to acquire the funds that they are able to lend. With an increased money
supply this is easier to do and is also less expensive. Therefore they can lend at a
lower rate of interest and still make a profit. Any lender who charges a high rate of
interest would lose customers who are attracted to other competing lenders with better
offers in terms of lower rates of interest.