Demand and supply of money after demonetization

2. Whatisdemonetization
• Act of
stripping
a currency unit
of its status
as legal tender.
ReasonsofDemonization
• Eradicate
counterfeit
currency
• Fight tax
evasion
• Promote a
cashless
economy
EffectsofDemonization
• Liquidity
Stress
• Short term
Chaos
• 400 to 1000%
increase in
cashless
transactions.

3. Demand of
Money
Supply of
Money

4. •REDUCED SUPPLY OF
MONEY
•LESSER MONEY IN
THE HAND OF PUBLIC
LIQUIDITY
•LOWER LIQUIDITY
LEADS TO REDUCE IN
DEMAND OF NORMAL
AND LUXURY GOODS
DECREASE
IN DEMAND •REDUCED DEMAND
LEADS TO REDUCED
SUPPLY.
•DECREASE IN FACTOR
INCOMES
REDUCED
INVESTMENT

5. •INCREASED CASH
DEPOSIT.
•86% OF CASH IN 500 -
1000 DEPOSITED IN
BANKS.
Liquidity in
Banks
•SBI REDUCES
LENDING INTERT
RATES
•0.9 PERCENT
DECREASE IN
LENDING RATES.
LOWERING OF
INTERST RATE •MANUFACTURERS
AND INDIVIDUALS
TAKE LOANS TO
INVEST.
•MULTIPLIER EFFECT
INCENTIVES
TO INVEST

6. Open Market
Operation
Printing of
new Currency
CRR
REPO RATE

7. Tax Rates
Budgetary PolicyPublic
Expenditure

8. HIGH LIQUIDITY IN BANKS DUE
TO DEMONIZATION WILL
INCREASE THE LENDING OF
MONEY AND REDUCTION OF
LENDING RATES.
HUGE
DEPOSITS IN
BANKS DUE
TO
DEMONIZATI
ON WOULD
LEAD TO
LOWER
DEPOSIT
RATES IN
SAVINGS
ACCOUNT.

9.  After demonetization the demand and supply of money was eased due to the wide
acceptance of mobile wallets.
 Paytm’s traffic increased by 435%, app downloads grew 200%, and there was
250% rise in overall transactions and transaction value.
 Government has brought UPI, USSD and BHIM app to reduce the requirement of
physical money.

10.  Due to reduced supply of physical money the consumption in the economy has
taken a hit.
 Consumption Production Employment Growth Tax
Revenue
 Due to reduced money supply India risks the position of fastest growing economy.

15. Demand
and
supply of
money
Interest
rates
Inflation or
Deflation
Monetary
Policy
Fiscal
Policy