Question

What is demonetization?
1. It involves introducing a new currency in the economy.
2. It involves reducing the official value of a currency in relation to other currencies.
3. It involves stripping a currency unit of its status as legal tender.
4. It involves increasing the official value of a currency in relation to other currencies.

Answer 1

Correct Answer - Option 3 : It involves stripping a currency unit of its status as legal tender.

The correct answer is It involves stripping a currency unit of its status as legal tender.

• Demonetization:
  • It is the act of replacing old currency with new currency as legal tender.
  • Notes and coins of a certain denomination were banned by the Central government.
  • In India, Demonetization has taken place three times till now.
    • 1^st Demonetization: In 1946, Rs.1000 and Rs.10000 were removed from circulation.
    • 2^nd Demonetization: In 1978, Rs. 1000, Rs. 5000, and Rs. 10000 were removed from circulation.
    • 3^rd Demonetization: In 2016, Rs. 500 and Rs. 1000 were removed from circulation.