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

The correct option is to leave it unchanged.

To understand why the aggregate money supply remains unchanged, let us look at how the money supply is defined in an economy. The most common measure of aggregate money supply is narrow money, represented as:

$$M_1=C+\mathrm{DD}+\mathrm{OD}$$

Where:
•
$C$
represents currency (notes and coins) held by the public.
•
$\mathrm{DD}$
represents demand deposits with commercial banks.
•
$\mathrm{OD}$
represents other deposits with the central bank.

When you withdraw ₹ 1,00,000 in cash from your Demand Deposit Account, the following two immediate changes take place within the components of the money supply formula:
1. The currency held by the public (
$C$
) increases by ₹ 1,00,000.
2. The demand deposits held with the bank (
$\mathrm{DD}$
) decrease by ₹ 1,00,000.

Since this transaction simply transfers funds from one component of the money supply to another, the net immediate change is calculated as:

$$\mathrm{Net\; Change}=+\mathrm{1,00,000}-\mathrm{1,00,000}=0$$

As a result, there is no change in the total quantity of the money supply, and the immediate effect is to leave it unchanged.