Ok in the Ancient Vedic Wisdom. What we are living in, is the Material Universe. In this Material Universe there exist Higher Beings like Demi-Gods and Demons. They have their own planets beyond our galaxies.Between Bhuvarloka and Bhurloka(earth) is antariksa, an interplanetary space where the Sun is situated. Here live beings like Raksasas, Yaksas, Pisacas and ghosts. They often descend on earth and are generally inimical to humans. Usuallly they will be born later as humans.
So who creates all these beings ? Well its Lord Brahma the Highest being in our Material Universe. Brahma is a Demi-God who also have thoughts like us, So in his long Life-Span he sometimes do things which is not so Good. Its him who creates demons and Ghosts. These demons have evil thinking(not all) and is always fighting the demi-gods for power in this Material Universe.
So lets go down to the Human-Level. Since the soul is entangled in this Material Universe it has to face good or evil. This Good or evil is created by other Ordinary Souls. Even Lord Brahma has a entangled Soul. So the cause of all these is Us.
So Why God dosen't get's involve ?
As i said theres two type of atmosphere the spritual and the material. The spritual platform has 3/4 of God's entire creation while the balance material platform has 1/4 creation and this is where our universes is. This 1/4 is darkness. These is where Good/Evil, repeated birth,death and diease exist. So the ordinary Soul is actually a fallen being from the Real World which is in the Spritual Atmosphere. Why we are fallen is because we want to enjoy material things, So Krishna(God) Gives us the free-will to enjoy material benefits. Since its Free-will, Krishna(God) would never interfere in our personal enjoyment. So because of this Personal Enjoyment of each and every soul, many Evils and goodness are cause.
So when Lord Brahma creates demons, Krishna(God) didn't interfere because Brahma wants to enjoy his creations. Who are these demons ? They are nothing but people/beings who worship these beings in other universes. Note: There are millions of other universes we are in, only one of them. Other evils done by Humans or to a certain extent some Demi-Gods are done by themselves. The Ordinary Soul which is fallen from the real world is the main cause for all evil and goodness in our material universe.
Conclusion:
1.Did God create Evil : No
2.Who created Evil : Us(we have ourselves to blame)
3.Who created Goodness : Also Us(People like Mother Terasa,Gandhi,Luther King)
4.What will God do? : He can only teach us in this material universe, He can only say whats Good and whats Bad, its up to us to heed his advice.
At the end of the Bhagavad Gita After saying all the reveal truths to the warrior Arjuna, Lord Krishna said : "This is my point of view, now you can go on as you wish".