Question

What is demonetisation?

Hint:

Demonetisation means officially declaring certain currency notes invalid and replacing them with new legal tender.

Answer 1

Demonetisation is an economic process in which a government withdraws the legal tender status of a particular currency note or coin.
When demonetisation is implemented, the specified currency notes are no longer accepted as a medium of exchange for goods and services.
The demonetised currency is usually replaced with new currency notes or coins, and people are required to exchange or deposit the old currency within a fixed time period.
This process is carried out as a policy decision by the government and the central bank of a country.
The main objectives of demonetisation include controlling black money, reducing corruption, curbing tax evasion, eliminating counterfeit currency, and discouraging illegal activities.
Demonetisation also aims to promote digital payments and reduce excessive dependence on cash transactions in the economy.
Although demonetisation may cause short-term inconvenience to the public, it is intended to strengthen the financial system and bring transparency in economic transactions.