If there is less money circulating in the market, the income of the money fund will rise. What is the principle?

? Accurately speaking, after the interest rate of bank deposits rises, the money in the society will go to the bank to save it. In this way, there is less money in society. Money enters the bank from the circulation market and is stored. In the corresponding market, there will be less funds for purchase and investment. This is the regulatory role of monetary policy. When there is more money circulating in society, it will lead to corresponding inflation. When inflation is serious, it will lead to currency depreciation. If the currency depreciates seriously, it will lead to the shrinking of the wealth of ordinary people. The money in the hands of ordinary people is worthless, the purchasing power of money becomes smaller, and the quality of life of ordinary people will also decline. If it continues to deteriorate, it will become an unstable factor in society. At this time, the state will intervene, and the intervention measures are often to raise the corresponding deposit interest rate and collect the money circulating in the market. When the market is short of money, adjust by lowering interest rates and release funds again.

On the other hand, prices are rising, while the wealth of ordinary people is shrinking. Will form the so-called stagflation, that is, the so-called inflation and unsalable goods coexist. At this time, the production desire of enterprises will be reduced, and the products in society will be reduced, resulting in a shortage of materials and further shortages of materials. On the other hand, people's desire to buy is also decreasing, and materials are unsalable. At this time, economic development will be restrained and unemployment will increase accordingly.

? In addition, let's talk about the relationship between money fund interest rate and bank deposit interest rate. When the bank's interest rate is raised, the interest rates of money market funds' investment objects such as central bank bills, short-term bonds, bond repurchases, interbank deposits and other products will also rise accordingly, making the yield of money funds rise with the increase of interest rates. In other words, the interest rate of the money fund will change synchronously with the interest rate of bank deposits.

? When the interest rate of money fund rises, just like the rise of bank deposits, it will lead people to save bank deposits to buy this kind of monetary investment products, and the currency circulating in natural society will decrease accordingly.

? So this is why when the interest rate of the money fund rises, there will be less money circulating in the market.