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rd low of 2% (Bhattarai, 2016).
Reserve Bank Act 1989 clarified that New Zealand's monetary policy aimed to maintain the stability of the general price level. According to the Policy Targets Agreement signed in 2002, the average annual inflation rate would be controlled between 1%-3%. The main tool of monetary policy is OCR, OCR affects New Zealand market interest rates and the New Zealand dollar exchange rate, while interest rates and exchange rates affect the aggregate demand for currency (Bhattarai, 2016). As OCR increases, interest rates rise, consumer savings are encouraged, and corporate borrowing is curtailed because through savings, more interest will be generated, and borrowing requires more interest, which reduces consumption and investment spending and thereby reduces economic activity. On the contrary, Reduced interest rates will increase consumption and investment needs. As a result, OCR affects economic activity by influencing interest rates (Bhattarai, 2016).
OCR exerts upward or downward pressure on prices by affecting aggregate demand. OCR increases, which will to some extent reduce the total demand for currency, making consumer goods prices down, thus reducing the rate of inflation. OCR reduction has the opposite effect. In addition, OCR also affects inflation through exchange rates. OCR raises, which will push exchange rate, making the prices of the New Zealand dollar of imported goods lower, so as to exert downward pressure on inflation.
In short, the New Zealand central bank affected ordinary New Zealanders’ living by adjusting OCR to affect interest rates for mortgages, loans, deposits, and inflation, economic activities, so as to prevent fluctuations in economic growth and employment rate to protect a more stable economic life for the New Zealand people.
New Zealand's inflation rate remained at 1-3% between 2014 and 2016, indicating that these monetary policies have served their intended purpose. The Central Bank of New Zealand adjusted OCR frequently within a short period of time, which on the one hand showed that the Central Bank was able to deal with economic development problems through timely adoption of monetary policy, on the other hand, it also showed that the world economic situation was unstable, only relying on monetary policy could not fundamentally solve the problem.

2.7 Multiplier effect and automatic stabilization effect
From 2010 to 2016, New Zealand's economy faced different problems, on the whole these problems have been solved better. These problems were resolved by the government because on the one hand, the government adopted a corresponding response policy, the New Zealand government in 2014 mainly used tense fiscal and monetary policy, from 2014 to 2016, mainly used in the expanded fiscal and monetary policy, on the other hand, the solution of these problems has a certain relationship with the automatic effect of the economic stability.
Automatic stabilization effect is a mechanism existing in an economic system to reduce the impact of various disturbances on national income. It can automatically suppress the inflation during t