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UPSC 2020: If you withdraw 8 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 8 1,00,000
(b)to increase it by 8 1,00,000
(c)to increase it by more than 8 1,00,000
(d)to leave it unchanged
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Not attemptedCorrect Answer: (d) to leave it unchanged
Currency with the public and demand deposits are both components of the narrow-money aggregate M1. Converting ₹1,00,000 of demand-deposit money into cash merely shifts the form of money within M1; the total stock remains the same. Hence aggregate money supply is unchanged. ([rbi.org.in](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=18629&utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2020 Indian Economy question?▼
The correct answer is option (d): to leave it unchanged. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Monetary Policy & Money Supply question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2020, GS Paper 1, as Question 50. It falls under Indian Economy > Monetary Policy & Money Supply.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from Monetary Policy & Money Supply?▼
UPSC has asked 27 questions from Monetary Policy & Money Supply (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.