The Centre’s demonetisation drive will help lower inflation. As the black money goes out of the system, the money supply will shrink to some degree. This will reduce the inflation rate in the absence of any open market operations (OMO) by the RBI. Critically discuss.

Question:

The Centre’s demonetisation drive will help lower inflation. As the black money goes out of the system, the money supply will shrink to some degree. This will reduce the inflation rate in the absence of any open market operations (OMO) by the RBI. Critically discuss.