Question

What are benefits of demonetization?

Answer 1

Answer:

Explanation:

The return of almost all the demonetised currency to the banking system may create the false impression that the exercise was a failure, but benefits such as the ability of income tax officials to track depositors and crack down on suspicious transactions could lead to long-term benefits such as better tax compliance, ...

Answer 2

Answer:

Getting fake currency out of circulation: Demonetization can also be used to get fake currency out of circulation in a country’s economy since such currencies cannot be deposited in banks and other financial institutions.

Controlling inflation: When inflation really gets out of hand, one solution can be to completely change the currency and to start afresh. With increase in cash available for government expenditure and reduced state borrowing, inflation will fall for the short term and thus prices of basic commodities will also fall.

Tax Collection: Money deposited in the bank during demonetization can be taxed especially if the affected parties were trying to evade taxation by keeping hard cash.

Increased Savings : When currency is demonetized, people tend to deposit their cash with a bank and store less physical currency at home. This helps them save more.

Lower lending rates : With currency demonetization, money moves from people to banks and financial institutions.

Explanation:

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