What is Demonetization?

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Joseph Rossignol asked 17-Feb-2020 in Economy by Joseph Rossignol
edited 17-Feb-2020 by Joseph-Rossignol

Explain what is demonetization and was it necessary to launch in India. and why?

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Harsh Pandey answered 17-Feb-2020 by Harsh Pandey

What is Demonetization?

Demonetization is the act of stripping a currency unit of its regular as legal tender.  It happens on every occasion there may be an exchange of national foreign money: The contemporary form of sorts of cash is pulled from the flow and retired, regularly to be replaced with new notes or coins. Sometimes, a nation completely replaces the old currency with a new one.

The contrary of demonetization is remonetization, wherein a form of payment is restored as legal tender. In 2016, the Indian government decided to demonetize the 500- and 1000- rupee notes, the two largest denominations in its currency system; those notes accounted for 86 percent of the country's circulating cash.  

India's Prime Minister Narendra Modi announced to the citizenry on Nov. 8, 2016, that 500 rupees and  1000 rupee notes will be discontinued hence invalid replacing it with new 2000 and 500 rupees notes.