In the economy it is often necessary to stimulate the economy when it is going through a slump or a fall in growth, likewise it may be required to keep growth under control as a country thrives under stable and controlled growth and inflation. In some situations we may require a tool used by the Bank of England here in Britain called monetary policy. This is the use of both interest rates and money supply to help control the level of inflation and growth through the factors that make up aggregate demand.
This policy directly effects firms and consumers around the country and can often have a powerful effect (give real life example e.g. Britain, Canada, Japan).
Further explain the the the mechanism of how the interest rates effect all factors