Question

What is Demonetisation? Give an Example. What are Benefits of Demonetisation?

Answer 1

Demonetisation refers to withdrawal Of money in circulation as a legal tender of the country.

Example : Demonetisation of Rs 1,000 and Rs 500 notes by rhe Reserves Bank of India (RBI) on Nov. 8, 2016.

Benefits of Demonetisation -

(i) Demonetisation combats black money. Black money help by the people reduced to pieces of paper, unless people make a declaration of it.

(ii) Demonetisation leads to a rise in tax revenue of the government (implying a fall in budgetary deficit).This happens because Demonetisation forces people to shift to cashless transaction with reduces tax evasion.