What are the positive and negative implications of demonetization on AD? Also, experts, which topics from macro or micro do you think can be related to demonetization?

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Solution

Dear Student

Demonetization has a vivid effect on the Aggregate Demand . First very short term effect would be that AD will fall . This is because due to sudden announcement of the decision made and the time gap required for exchanging notes there will be dearth of liquid money in the economy . People will become concious about spending their liquid money . Also many people are not aware of electronic payment systems or the usage of credit debit card so they tend to cut down on consumption to save liquid money for emergencies .

Regards .

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