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Impact Of Demonetization On Indian Economy

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IMPACT OF CURRENCY DEMONETIZATION ON THE INDIAN ECONOMY
M. Srinivasan B.Com III Yr.A
P.V.Mohan babu B.Com III Yr.A
R.Yogesh B.Com III Yr. A
Department of Commerce
K.C.S.Kasi Nadar College of Arts & Science
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Introduction
Demonetization is the process of withdrawal of a particular form of currency from circulation. Demonetization becomes necessary whenever there is a change in the national currency. The old unit of currency must be retrieved and replaced with a new currency unit. It involves either introducing new notes or coins of the same denomination or completely replacing the old denominations with the new denomination which is usually carried out as an ambush on the black market. In India demonetization has occurred thrice. The first …show more content…

Macroeconomic View
The effect of demonetization in the economy due to the chaos created in the demonetization. Baumol (1952) tried to understand the transaction demand for money dependent on the interest rates and the pattern of the expenses procedure. We generally have two procedures either the receipts follow disbursements or the disbursements follow receipts. By taking both accounts when we perform the calculations then we find out that demand for the cash is not proportional to the value of transaction.
We can understand this thing by the example that let’s say we had 10 percent of the money supply than we generally have in our country, then we could do far less transactions than the 10 percent of the total transactions we generally could do with our money supply. By the model, we can also observe that the value people want to draw in one go is always positively related with the broker’s

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