Interest rate

Interest rate
An interest rate is the price a borrower pays for the use of money they do not own, for instance a small company might borrow from a bank to kick start their business, and the return a lender receives for deferring the use of funds, by lending it to the borrower. Interest rates are normally expressed as a percentage rate over the period of one year.
When the economic face to inflation, the government may use monetary policy which may increase the interest rate, because if the government want to deal with inflation, they must be decrease the interest rate. If the interest rate goes up , people want to save money, and expensive to borrow, the investment will goes down. Therefore, lower demand and investment can help inflation.
When the economic face to recession, the government may decrease the interest rate. Because interest rate goes down, people do not want to saving , they prefer spending on some goods. Also investment will goes up. Because easy to borrow.
Why we need interest rate, I think because it can help the government deal with some problem , also it is help bank supportability.
Cause of interest rate:
1 Deferred consumption
2 Inflationary expectations
3 Alternative investments.
4 Risks of investment.
5 Taxes
6 Liquidity preference