Question

how does interest rate determine from a lenders, borrowers, investors and economy point of view?

Answer 1

Interest rate will always be demanded at a higher rate by the lenders in the economy because interest rate will be charged by various lenders like commercial banks will be in accordance with the monetary policy which have been set by the central banks in order to maintain the constant money flow in the economy.

Borrowers in the economy will always be demanding a lower rate of interest because they will have to bear the cost of interest and hence these borrowers will always want a lower rate of interest and they will be trying to have a higher demand for a lower rate of interest and lower demand for higher rate of interest

Investors in the economy will be trying to invest more when the interest rate is lower and they will be trying to save less by borrowing where as when there would be higher rate of interest than they would be trying to save more and deposit.

Economy will always be wanting a stable rate of interest because it will reflect that there will be economic stability as interest rates will be continuously affecting the level of growth and level of demand and supply in the economy so central bank is using interest rates as an important tool to control the inflation and demand and money flow in the economy.