## How Central Banks Use Contractionary Monetary Policy to Control the Economy
The way a nation manages its circulating money says a lot about its economic performance. Central banks and monetary authorities have specific tools for this - and understanding these tools is essential for those who follow financial markets.
Imagine a scenario where inflation is too high and harming the economy. What does the central bank do? It can sell government bonds, raise interest rates, or increase the reserve requirements of banks. These actions reduce the amount of money available for loans and consumption