On November 8, 2016, the government announced a historic measure, with profound implications for the economy i.e Demonetisation. Which of the following option depicts a clear definition of the term Demonetisation?
Answer & explanation
Correct answer: option 1
The correct answer is option 1: Putting an official stop on the status of a currency as a legal tender
Demonetization refers to the act of withdrawing legal tender status from a currency unit. In simpler terms, it means that the government declares certain banknotes as no longer valid for making payments.
Here's how the other options relate to demonetization:
- Putting an intrinsic value to a commodity: This refers to assigning a value to a physical good based on its inherent worth. While demonetization can affect the value of a currency, it doesn't involve assigning intrinsic value to a commodity.
- Giving new currency to the citizens of a country: This is often done as part of a demonetization process to replace the old, invalid currency with new notes. However, it's not the defining characteristic of demonetization itself.