 In the lecture series, we are discussing how central bank operations effect central banks monetary liability. But at the same time, we already know that there is not only one player central bank in this process, rather there are three different players and public is one of them. So, if the public changes its decision, then it can be a monetary base change or not. We would like to see this. So, what I will take as an example is that if the public takes a decision, then how will the decision be made one day from the public? This happens over time, it becomes a trend that people keep their money in banks or not. If this decision is made, then it is for the people. Now, how does this collective happen? This can happen for any reason. For example, if the return of the banks is very less, then most people withdraw money from the banks. Or because checkable deposits are basically used as a medium of exchange through a check, then if for some reason, there are hurdles in the clearance of the check and if it takes time, then it means that the liquidity of the bank deposit will be reduced. So, instead of the bank deposit, people will start preferring the currency. So, this means that it is the decision of the people to keep their money in the currency or the checkable deposit. You have to remember that in the money of the central bank, the ultimate meaning of currency and reserve is the liabilities of the central bank. Practical meaning is different. People use commercial banks and central bank transactions, but ultimately, both have the same status as the liabilities of the central bank. In the same way, remember that for the people, whether it is the deposit of the commercial bank or the currency, it is ultimately the medium of exchange. So, we see that if a public decision is taken, public at large, that is, most of the people convert their deposits into the currency or the reserve, they convert the currency into the deposits, then is there a monetary base based on this, which is the monetary liability of the central bank? If we look at the money, it will make a difference. Overall money is the money that we will discuss later. Now, we are studying the money of the central bank. So, will there be any difference in the money of the central bank? We will see this. So, we will start by saying that the public has made a decision. So, remember that the public's decision is initiated by the public. This is not done by the central bank. In fact, we are starting to see what will happen to the money of the central bank. But we are starting to see that this decision is made by the public and not by the central bank. The end result that we will see, we will go through the process, but if I share the end result with you, then we will see that the reserves have changed, but the monetary base has not changed. So, there will be an implication that the control of the central bank is more on the reserves or on the overall monetary base. We will discuss this implication later in this lecture. So, we will start with an example. What is an example? I took an example for open market operation. Now, who started the open market operation? Who initiated the process? The central bank. Even if the open market was purchased, the central bank did the process. Even if the open market was sale, the central bank wanted the open market to be sale. That is, I would sell the government securities of 2 billion rupees to the commercial bank. But this process is initiating the general public. And what did the public decide? That they are withdrawing money from the banks. And ultimately, we see that the total withdrawals are equal to 2 billion rupees. This means that they have converted to currency. But for people, it is the same. That was a checkable deposit. That was also a medium of exchange. This is currency. This is also a medium of exchange. But what will be the implications of this? For the monetary liabilities of the central bank, we see that. First of all, we see that the non-bank public. What does non-bank public mean? That it does not include banks. We want to see the public who did this. The public whose decision is that he has converted to currency to his deposit. That is, he has withdrawn 1 or 2 billion rupees from his deposit. What are the effects on his balance sheet? What happened in his balance sheet is that the checkable deposit is less than 2 billion rupees. Of course, he has withdrawn 2 billion rupees. So, his checkable deposit will be less. But the currency is also his asset. If the people say that the checkable deposit is an asset, then the currency is also his asset. So, what will happen? His 1 asset is less. Which asset? The checkable deposit. And 1 asset has increased. Which currency? And on the other hand, if we look at his liabilities, then there is no difference in his liabilities. This is also his asset. That is also his asset. If we convert 1 asset into another asset, then the liability does not change. So, in the case of non-public, in his balance sheet, 1 of the assets has increased, 1 of the assets has decreased. Both have cancelled out each other. There is no difference in the liabilities. Now, we see that the commercial banks from whom this is withdrawn, what is the difference in their balance sheet? So, in their balance sheet, there is a change in the assets, there is a change in the liabilities. What is the change in the assets? The change in the assets is that their reserves are less than 2 billion. Now, what I was saying in the last lecture, that reserves and currencies are convertible. You do not understand the difference in the sense of liability. This point has been proved here. That is why we said that if the public has withdrawn the deposit and increased its currency, then the reserves of the amount have decreased. Now, why the reserves have decreased? Because this withdrawal has been converted to the currency instead of the reserves. It is okay, right? Because they had not kept 2 billion rupees with them at that time. So, this is a conversion, basically. But ultimately, the reserves have decreased due to the commercial banks. This has been reduced in their assets. But at the same time, their checkable deposit has also decreased by 2 billion rupees. And this deposit used to take their liabilities. So, commercial banks or the depository institution's assets have also decreased, that is, their reserves have decreased due to the end of the deposit. And on the other hand, their liabilities have also decreased by 2 billion rupees. Because when people withdraw, they have taken their money. Now, they do not have their liabilities. This is 2 billion rupees. We will then want to see what is the balance sheet of the central bank. If we look at the balance sheet of the central bank, then there is no difference on the central bank's assets. But one of its liabilities has increased and one of its liabilities has decreased. How? The reserves also have the liabilities of the central bank. The currency also has the liabilities of the central bank. So, if we look at the whole transaction, then the currency in circulation has increased by 2 billion. And that is the central bank's liabilities because the liabilities are written on the currency. Whereas, we know that if we look at the monetary base from the liability side, then the second item is the reserves. And that means, the deposits of the commercial bank which are near the central bank, that means that the reserves have decreased due to the commercial banks, then the liability of the central bank has decreased. So, this means that the reserves of the central bank has no difference on the assets. But one of its liabilities has increased and one of its liabilities has decreased. And the other one has cancelled out the net result. Remember, the end result of the balance sheet is zero. If the asset increases, then the liability increases. If the asset increases, then the liability decreases. If the asset increases, then another liability will be less. The net result will always be zero. That is why it is called the balance sheet. So, this means that the reserves have decreased due to the central bank's liabilities. But the currency has increased due to the central bank's liability. Now, we want to see what the difference is on the overall monetary base of the central bank. So, remember that if you define the monetary base as currency plus reserves has decreased from 2 billion, then what difference will both of them have? Nothing. When two things are being added, one has increased from 2 billion, the other has decreased from 2 billion. So, what is the net result? The resultant value remains the same. So, what is the difference on the monetary base? There is no difference on the monetary base. But the reserves have decreased from 2 billion. So, this means that if we want to see what the difference is on the monetary base, that is, the currency and the reserves are more controlled or the reserves of the central bank are more controlled by the commercial banks or the monetary liabilities of the central bank. So, remember that the reserves are volatile. That is, the reserves are more controlled by the central bank. The word imperfect is not so important here. In fact, we will say that the imperfect can also be on the monetary base. But if we compare the monetary base and the reserves, the control of the central bank can be more controlled and the reserves can be less controlled. For example, we have seen that a decision was not taken by the public and the reserves have been changed so, let us understand two things. One is that the central bank has no control over the reserves. It can also be changed from the public decision. And the other thing is that the final money decision has a player in the public with the central bank. So, this means that the reserves can be volatile. As the public decision can be changed, the reserves can be changed. So, if the currency is also changed, then there is no net impact on the monetary base. So, we can say that if we want to see the control of the central bank, then there is less control compared to the monetary base and more control on the monetary base. According to the examples we have read so far, there is perfect control on the monetary base. Although there is no perfect monetary base, we will see that it can also be imperfect. But according to the results so far, there is more monetary base in the control of the central bank. Thank you.