[Solved] If you withdraw ₹ 1, 00, 000 in cash from your Demand Deposit Account at your Bank, the immediate effect on aggregate money supply in the economy will be a. To reduce it by ₹1,00,000 b. To increase it by ₹1,00,000 c. To increase it by more than ₹1,00,000 d. To leave it unchanged Skip to main content

[Solved] If you withdraw ₹ 1, 00, 000 in cash from your Demand Deposit Account at your Bank, the immediate effect on aggregate money supply in the economy will be a. To reduce it by ₹1,00,000 b. To increase it by ₹1,00,000 c. To increase it by more than ₹1,00,000 d. To leave it unchanged

Question

10. If you withdraw ₹ 1, 00, 000 in cash from your Demand Deposit Account at your Bank, the immediate effect on aggregate money supply in the economy will be

a. To reduce it by ₹1,00,000

b. To increase it by ₹1,00,000

c. To increase it by more than ₹1,00,000

d. To leave it unchanged

Answer: D

Detailed Explanation

Money supply includes both currency in circulation and demand deposits (like those in your bank account).
When you withdraw ₹1,00,000 in cash, the form of money changes:

  • Demand deposits decrease by ₹1,00,000
  • Currency in circulation increases by ₹1,00,000

But the total money supply remains the same.
This is a simple conversion within the same monetary aggregate (M1/M2).

Source: RBI Monetary Policy Framework, NCERT Macroeconomics, Class 12

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