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

[UPSC Civil Services Exam – 2020 Prelims]

(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)        

Explanation:

  • Money supply consists of total currency circulating in the public plus the demand deposits of the public with banks.
  • Hence, we can write Money Supply = Currency with public + Currency in the bank.
  • If we look at the equation; when you draw cash from the bank, it goes to the currency in hand but it does not change the value of the money supply.
  • Hence, there will be no change in the aggregate money supply.

Consider the following statements:                                                                   The Parliament of India can place a particular law in the Ninth Schedule of the Constitution of India. The validity of a law placed in the Ninth Schedule cannot be examined by any court and no judgement can be made on it. Which of the statements given above is/are correct?

Consider the following statements:                                               

Read More »

Consider the following statements:                                                         The Parliament of India can place a particular law in the Ninth Schedule of the Constitution of India. The validity of a law placed in the Ninth Schedule cannot be examined by any court and no judgement can be made on it. Which of the statements given above is/are correct?

Consider the following statements:                                               

Read More »
Loading...
Left Menu Icon