Answer to Question #104519 in Macroeconomics for annie

Question

If people do not hold demand deposits central bank money and money supply will be equal to each other. True or False explain.

Answer 1

It's right. According to monetary aggregates:

M₀ = cash in circulation (coins, banknotes).

M₁ = M₀ + checks, demand deposits (including bank debit cards), balances in national currency on the settlement accounts of organizations, current and other accounts on demand of the population, non-financial and financial (except credit) organizations.

we remove deposits on demand: consequently M₀=M₁