Question
GSEasyPrelims 2020Economy

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

Explanation

The immediate effect on aggregate money supply in the economy, if you withdraw Rs. 1,00,000 in cash from your Demand Deposit Account at your bank, will be “No change”.

Reason: Aggregate money supply refers to the total amount of money circulating in the economy, including both cash and deposits in commercial banks.

  • M3 = M1 + Time Deposits with Banks Where:
  • M1 = Currency in circulation + Demand deposits with banks + Other deposits with the central bank
Money Multipliers

Money Multipliers

When you withdraw cash from your demand deposit account, you are simply converting your deposit (which is part of the money supply) into currency (also part of the money supply).

The total amount of money in the system remains the same, just the composition (ratio of cash to deposits) changes.

More questions fromEconomy

See All Answers

Trusted by 2L aspirants

Practice UPSC Prelims PYQs Smarter

Practice Now
  • Track accuracy & weak areas
  • See past trends & repeated themes
Start Practicing Now

PYQs by Papers

Most repeated Topics from Economy in Last 5 years

Repeated Topics
Questions in Last 5 Years
Finance and Financial Markets27 (34%)
Money, Banking and Monetary Policy16 (20%)
Public Finance in India11 (14%)
Infrastructure and Investment Models in India9 (11%)
Services and Digital Economy9 (11%)

Crack UPSC with your
Personal AI Mentor

An AI-powered ecosystem to learn, practice, and evaluate with discipline

SuperKalam
SuperKalam is your personal mentor for UPSC preparation, guiding you at every step of the exam journey.

Download the App

Get it on Google PlayDownload on the App Store
Follow us

ⓒ Snapstack Technologies Private Limited