Q50. If you withdraw Rs. 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on the 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
- The total stock of money in circulation among the public at a particular point of time is called the money supply. It needs to be noted that total stock of money is different from total supply of money. The most common measure of liquidity to estimate aggregate money supply includes currency and demand deposits both, hence changing the form of money from demand deposit to the currency will change the form, in which the money is held but not the aggregate money supply and hence leave it unchanged.
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