What is the deposit reserve ratio? It is a restriction of the central bank on commercial banks, which means that commercial banks absorb a certain proportion of deposits. For example, if the deposit reserve ratio is 30% after absorbing10 billion yuan, then you must hand over 3 billion yuan to the central bank to save the remaining 7 billion yuan for you, and then you can start other businesses or borrow money from companies or individuals, and then the deposit will have a rolling multiple. Suppose that after the 7 billion yuan is released, the money flows back to the bank during the transaction, and then he has to take out another 30%, which means 260%.
Now the deposit reserve ratio has dropped to 20%, and the total amount it can lend for the first time 1 time is 80, and the total amount it can lend for the second time is 64. Are the two together much more than when the deposit reserve ratio is 30%? The deposits absorbed by commercial banks remain unchanged at 1000 billion, but the deposit reserve ratio has changed, resulting in more currency circulating in the market. Because enterprises need enough funds to develop personal transactions or residents' lives, the scarcer the funds, the higher the use cost and the higher the interest rate.
Now that the deposit reserve ratio has been reduced and more and more money is circulating in the market, there is no shortage of money in the market, and there is not such a big gap. Most people can get the money when they need it. In this way, the cost of using money will naturally fall. To put it simply, now all three people want to eat steamed bread. There is no other choice but three steamed buns. If you want to eat two, you have to spend more money. But now there are six steamed buns, and it doesn't cost much. Then the cost of eating steamed buns will drop, and the cost of using money will also drop.