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 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 1

Correct option is (d) to leave it unchanged

Aggregate money supply means M3 = Coin and currency with public + Demand Deposit with commercial banks + Time Deposits with commercial banks.

So if you withdraw 100000 rupees from your account then M3 will remain unchanged because 1 lakh will shift from the column of "demand deposits" to the "coin. currency with public."