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Trading and Investment Terminology

Demonetization

Demonetization can be described as the action of depriving a currency unit of its value as legal tender.

 

It happens at a point when there is a change in currency of a country: The present form or forms of cashis pulled from course and resigned, regularly to be supplanted with new notes or coins.

 

In some cases, a nation totally replaces the old cash with new cash.

 

Something contrary to demonetization is remonetization, in which a type of payment is reestablished as legal tender.

 

Removing the legal tender value of a unit of currency is a significant intervention into a nation's economy as it straightforwardly impacts the mode of exchange used in everyday exchanges.

 

It can assist in balancing out existing issues, or it can create tumult in an economy, particularly if undertaken abruptly or all of a sudden.

 

All things considered, demonetization is attempted by countries for various reasons.

 

In 2016, the Indian government chose to demonetize the 500 and the 1000 rupee notes, the two highest denominations in its currency framework; these notes represented 86 percent of the country’s cash.

 

With small notice, India's Prime Minister Narendra Modi declared to the populace on Nov. 8, 2016 that those notes were useless, from this point forward – and they had until the year's end to deposit or exchange them for recently presented 500 rupee and 2000 rupee notes.

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