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GS Paper IUPSC Prelims 2020
Banking & Financial System
Question No. 153Interactive Test Mode
00:00
+2-0.66

Q153. 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:

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:

Select the correct option below (or cross out options to eliminate)
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Official Answer Key & Detailed Solution

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Official UPSC Answer KeyUPSC Prelims 2020 • Indian Economy

Correct Answer: Option (D) — to leave it unchanged

Concept & Option Breakdown

Standard Reference Verified

Aggregate money supply (M3 or M1) consists of currency in circulation with the public plus demand/time deposits held by the public with the banking system. When ₹1,00,000 is withdrawn in cash from a demand deposit, demand deposits decrease by ₹1,00,000 while currency held by the public increases by ₹1,00,000. Because both are components of aggregate money supply, the total money supply remains unchanged immediately.

Elimination Heuristic & Exam Approach

Money Supply = Currency with Public + Deposits. Withdrawing cash merely shifts funds between these two components, leaving the sum identical.

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2020 (Q153)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Banking & Financial System
Official Answer KeyOption (D) — to leave it unchanged

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Frequently Asked Questions — UPSC Prelims 2020 Q153

What is the official answer for UPSC Prelims 2020 GS Paper I Question 153 (Indian Economy)?

The official UPSC answer key for this 2020 Indian Economy (Banking & Financial System) question is Option (D): "to leave it unchanged". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2020 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Banking & Financial System". You can explore all repeated questions from Banking & Financial System in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Banking & Financial System UPSC Prelims question using option elimination?

Money Supply = Currency with Public + Deposits. Withdrawing cash merely shifts funds between these two components, leaving the sum identical.

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