What is the effect of demonitisation on PPC curve?
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The effect of demonitisation on the PPC curve can be studied as long term effect and short term effect. In the short term the PPC curve will shift to the left. The people are not familiar with internet banking and methods of online payments. Besides there is a lot of black money which has to be unearthed. So the resources will not be utilized to the optimum level.
In the long run the resources will be utilized fully and more resources will available. The people will be familiar with the latest methods and less black money will be in circulation. So the PPC curve will shift to the right.
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The PPC curve does not shift in demonetization because the resources do not increase or decrease they are as equally efficient as they were before. But the PPC curve has this change in it when there is a cut in the production and it is only for few months.
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