If you withdraw Rs. 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
Detailed Explanation:
Answer: Option 4 — to leave it unchanged
When you withdraw Rs. 1,00,000 in cash from your demand deposit account, you are converting a deposit (part of money supply) into currency (also part of money supply). The total money supply remains constant; only its composition changes—cash increases while demand deposits decrease by the same amount. Since both cash and demand deposits are components of M1 (the primary measure of money supply), the net effect on aggregate money supply is zero.
Question 7 of 17 Monetary Policy
Practice PYQ questions from this topic across all years
If the RBI decides to adopt an expansionist monetary policy, which of the following w...
The money multiplier in an economy increases with which one of the following?