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
Answer
The correct answer is A: to leave it unchanged. Withdrawing cash from a demand deposit account simply converts one form of money (deposit) to another (currency in hand). Both are part of M1, so aggregate money supply remains unchanged.
A.to leave it unchanged✓ Correct
B.to reduce it by ₹1,00,000
C.to increase it by more than ₹1,00,000
D.to increase it by ₹1,00,000
Explanation
Withdrawing cash from a demand deposit account simply converts one form of money (deposit) to another (currency in hand). Both are part of M1, so aggregate money supply remains unchanged.
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