Monetary policy: Another factor influencing monetary supply and demand

In the development of the market economy, to avoid certain undesirable economic difficulties national macro regulation has become gradually visible and has been playing an ever increasingly important role, where the focus of macro regulation is about financial regulation. The so-called financial regulation means that through introducing and implementing monetary policies by the central bank, the nation materializes its adjustment and control over the entire spectrum of socio-economic activities. The effect and influence of financial regulations are not simply about some aspects of the socio-economic activities. Instead, they permeate each and every corner of the national economy. Bymaking use of the particular position occupied by the central bank and the tools of monetary policies available to the central bank, the nation regulates such relevant variables as the scale of credit, the quantity ofmoney in circulation, etc. By varying themoney supply, the government effectively adjusts the overall level of economic activities so that the needs of national management and necessary intervention of social and economic activities are met. There are multiple standards for evaluating the goals and effects of financial regulation, including such comprehensive criteria as price stability, economic growth, sufficient employment, and balance in international payments. In order to materialize these goals, monetary policies often need to be employed jointly with fiscal policies. Because monetary policies are the core contents of financial regulation, this chapter will focus onmonetary policies while discussing other relevant topics.