Question
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
(a) to reduce it by Rs. 1,00,000
(b) to increase it by Rs. 1,00,000
(c) to increase it by more than Rs. 1,00,000
(d) to leave it unchanged
Answer:
D
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Explanation:
When you withdraw money from a Demand Deposit Account, it does not impact the aggregate money supply. The total amount of monetary assets in the economy remains unchanged. The only change is the form of the money, as it shifts from "Demand Deposits with the Banking System" to "Currency with the Public." Therefore, the act of withdrawal leaves the aggregate money supply unaffected.