Interest rates and their effects on the economy concern not only macroeconomists but also consumers, savers, borrowers and lenders. A country can react and change its interest rates, based on the prosperity of its economy. The interest rate is the percentage usually paid by the borrower to the lender on a yearly basis for a loan of money (Merriam-Webster). If banks decided not to use interest rates, it would be impossible for others to borrow and therefore there would be much less money to spend in the economy. With interest rates, this allows banks to take a percentage of consumers' money and lend it to others, thus enabling economic growth. Interest rates also allow lenders to have a necessary “safety net” because there is a possibility that the borrower will not be able to repay a loan to the bank. A nation's interest rates can be raised or lowered, and these changes in interest rates are directly related to aggregate demand. Aggregate demand is the total demand for final goods and services in an economy at a given time (Business Dictionary). A nation uses interest rates for economic growth or to help prevent inflation. When economic growth is needed, a nation would lower interest rates. However, if a country is worried about inflation, it may choose to raise interest rates. When interest rates, whether raised or lowered, will have a negative or positive impact on consumers and will have a positive or negative impact on investors. Just like gross domestic product (GDP), interest rates branch into nominal and real. When becoming familiar with interest rates, being able to distinguish between a nominal and a real interest rate is crucial… middle of the paper… two aspects, nominal and real, which both measure two different controls. . The face value measures what is considered the “price you pay” of a loan, which includes the price of inflation. While the real measures the cost of a loan without inflationary rates. From nominal and real rates there are also lowered and increased rates. When the interest rate is lowered, consumer spending increases while savings decreases. Spending on goods like housing becomes one of the ways AD increases. Although the AD increases, it brings the economy out of the lack of spending, but it puts the economy into the possibility of inflation. Unlike low rates, high rates stop inflation but create the possibility of recession. High interest rates create a decline in demand for goods and services. This fall in CEO puts an end to spending, borrowing and more, creating the incentive to save, ultimately curbing inflation.