{"id":1717,"date":"2024-03-28T22:59:41","date_gmt":"2024-03-28T17:29:41","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1717"},"modified":"2024-04-03T07:16:12","modified_gmt":"2024-04-03T01:46:12","slug":"q-if-you-withdraw-100000-in-cash-from-your-demand-deposit-account-at-your-bank-the-immediate-effect-on-aggregate-money-supply-in-the-economy-will-be","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-if-you-withdraw-100000-in-cash-from-your-demand-deposit-account-at-your-bank-the-immediate-effect-on-aggregate-money-supply-in-the-economy-will-be","title":{"rendered":"Q. 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"},"content":{"rendered":"\n<ul class=\"mcq wp-block-list\">\n<li>to reduce it by 1,00,000<\/li>\n\n\n\n<li>to increase it by 1,00,000<\/li>\n\n\n\n<li>to increase it by more than 1,00,000<\/li>\n\n\n\n<li>to leave it unchanged<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer: (d) to leave it unchanged<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"aggregate-money-supply\">Aggregate money supply<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The&nbsp;<strong>aggregate money supply<\/strong>&nbsp;in an economy is typically considered to include&nbsp;<strong>both physical currency (cash) in circulation and Demand Deposits (balances in bank accounts that can be accessed on-demand) and Time Deposits with commercial banks.<\/strong><\/li>\n\n\n\n<li>When you withdraw&nbsp;<strong>\u20b91,00,000<\/strong>&nbsp;<strong>in cash<\/strong>&nbsp;from your Demand Deposit Account, you are essentially converting one form of money (bank deposits) into another form of money (physical currency).<\/li>\n\n\n\n<li>The&nbsp;<strong>total amount of money in the economy (the sum of physical currency and demand deposits) does not change<\/strong>&nbsp;due to this transaction. You have simply changed the composition of the money supply, not the total amount.<\/li>\n\n\n\n<li>Therefore, the&nbsp;<strong>immediate effect on the aggregate money supply in the economy is to leave it unchanged.<\/strong><\/li>\n<\/ul>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"money-supply\">Money Supply<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The money supply is the total amount of money used by the general public at a given point in time.<\/strong>\n<ul class=\"wp-block-list\">\n<li>It should be emphasized that total money supply and total money stock are two different things.<\/li>\n\n\n\n<li>Only that part of the&nbsp;<strong>overall stock of money with the public at any given time is considered the money supply.<\/strong><\/li>\n\n\n\n<li>Currency, printed notes, money in bank accounts, and other liquid assets make up circulating money.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Narrow money is also known as M1 and M2<\/strong>. Broad money means M3 and M4. The liquidity of these grades is decreasing.\u00a0<strong>M1 is the most liquid and makes transactions the easiest, while M4 is the least liquid.<\/strong>\n<ul class=\"wp-block-list\">\n<li>The&nbsp;<strong>most commonly used indicator of the money supply is M3<\/strong>. It is also known as the total amount of financial resources.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Reserve Money (M0):<\/strong>&nbsp;Other names include High-Powered Money, Financial Base, Base Money, etc. M0 is calculated as follows: Money in circulation + Bankers\u2019 deposits + Other deposits with RBI. It is the&nbsp;<strong>economic foundation\u2019s currency<\/strong>.<\/li>\n\n\n\n<li><strong>Narrow Money (M1):<\/strong>&nbsp;M1 equals money in circulation plus demand deposits in the banking system (current and savings accounts) plus additional deposits with the&nbsp;Reserve Bank of India (RBI).<\/li>\n\n\n\n<li><strong>Narrow Money (M2):<\/strong>&nbsp;Post Office Savings, Bank Savings Deposits added to M1 equals M2.<\/li>\n\n\n\n<li><strong>Broad Money (M3):<\/strong>&nbsp;M3 equals M1 plus time deposits made with banks.<\/li>\n\n\n\n<li><strong>Broad Money (M4):<\/strong>&nbsp;M4 is equal to M3 plus any deposits made at post office savings banks.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Answer: (d) to leave it unchanged Aggregate money supply Money Supply<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[53],"class_list":["post-1717","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-53"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":53,"label":"2020"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1717","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1717"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1717\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1717"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1717"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1717"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1717"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}