What is meant by demonetisation? What is its impact on the money supply of the country?
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Demonetisation w.r.t. India, refers to the two largest denomination notes of ₹ 500 and ₹ 1,000 (demonetised with immediate effect on 8 November 2016), ceasing to be legar tender except for a few specific purpose.
The impact of demonetisation on the money supply of the country would be that it will lead to money supply contraction in the form of cash. There had been restrictions placed on cash withdrawls. There is a presumption that the higher the amount of cash in circulation, the greater the amount of corruption.
In this sense, to reduce the cash in an economy could have important long-term benefits in terms of reducing levels of corruption.
The impact of demonetisation on the money supply of the country would be that it will lead to money supply contraction in the form of cash. There had been restrictions placed on cash withdrawls. There is a presumption that the higher the amount of cash in circulation, the greater the amount of corruption.
In this sense, to reduce the cash in an economy could have important long-term benefits in terms of reducing levels of corruption.
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