Three traditional magic weapons of monetary policy

The three magic weapons of monetary policy are as follows:

1, statutory deposit reserve ratio policy: The real effect is that it can expand the credit of deposit money banks and adjust the money multiplier.

2. rediscount policy: It means that the deposit money bank requests the central bank to discount the commercial paper discounted by its customers in order to obtain the credit support from the central bank.

3. Open market business: refers to the securities trading activities conducted by the central bank in the open market, with the purpose of regulating the base currency, thus affecting the money supply and market interest rate.

Monetary policy refers to various principles, policies and measures adopted by the People's Bank of China to control and regulate the money supply and credit quantity in order to achieve its specific economic goals. The essence of monetary policy is that the country adopts different tightening and easing policies according to the economic development in different periods, so as to achieve the purpose of stabilizing prices, full employment, promoting economic growth and balancing international payments.

According to the impact on total output, monetary policy can be divided into two categories: expansionary monetary policy (active monetary policy) and tight monetary policy (prudent monetary policy). When the economy is depressed, the central bank takes measures to increase the money supply, which leads to a drop in interest rates, stimulates investment and net exports, and increases total demand. This is the so-called expansionary monetary policy. On the other hand, when the economy is overheated and the inflation rate is too high, the central bank takes a series of measures to reduce the money supply, so as to raise interest rates, curb investment and consumption, slow down or slow down the growth rate of total output, and control the price level at a reasonable level. This is the tightening monetary policy.