In the short run there will be no effect on the production possibility curve in India .
The aggregate demand and the supply on the part of sellers will reduce for a period of time
But in the long run due to expansion of resources the PPC will shift towards the right .

Impact of Demonetisation on the Production Possibility Curve

Introduction
Demonetisation refers to the process of stripping a currency unit of its status as a legal tender. In November 2016, the Indian government implemented a massive demonetisation exercise by invalidating high-value currency notes. This move had significant effects on various aspects of the economy, including the production possibility curve (PPC).

Definition of Production Possibility Curve
The production possibility curve represents the different combinations of two goods or services that an economy can produce given its resources and technology, assuming full utilization of resources and efficiency. It shows the trade-off between producing one good over another.

Shift in Resources Allocation
Demonetisation can lead to a shift in resources allocation in the economy, which can impact the production possibility curve. Here are some key points to consider:

1. Decreased Consumption: Demonetisation can result in a decrease in consumption due to the shortage of cash and uncertainty in the economy. This can lead to a decrease in the production of goods and services aimed at satisfying immediate consumption needs.

2. Increased Savings: Demonetisation can also lead to an increase in savings as people tend to hold onto their money in uncertain times. This can result in a decrease in the production of goods and services aimed at immediate consumption and an increase in savings-related investments.

3. Increased Investment in Digital Economy: Demonetisation was aimed at promoting a digital economy. As people shift their transactions towards digital platforms, there can be an increase in the production of goods and services associated with the digital economy, such as online payment systems, e-commerce platforms, and digital devices.

Effect on the Production Possibility Curve
The impact of demonetisation on the production possibility curve can be summarized as follows:

1. Movement Along the Curve: Demonetisation can lead to a movement along the production possibility curve as resources are reallocated based on changes in consumption patterns and investment priorities.

2. Shift of the Curve: Depending on the magnitude and duration of the effects of demonetisation, there can be a shift in the production possibility curve. If the economy experiences a prolonged decrease in consumption and increase in savings, the curve may shift inward, indicating a decrease in the overall production capacity of the economy. Conversely, if the economy successfully transitions towards a digital economy with increased investment, the curve may shift outward, indicating an expansion of the production capacity.

3. Opportunity Cost: The opportunity cost of producing goods and services associated with immediate consumption may increase due to the decrease in available resources. This can lead to a decrease in the production of such goods and services and an increase in the production of goods and services associated with savings and the digital economy.

Conclusion
Demonetisation can have significant effects on the production possibility curve. It can lead to a shift in resources allocation, changes in consumption patterns, and increased investment in the digital economy. The overall impact on the production possibility curve will depend on the duration and magnitude of the effects, with potential shifts and movements along the curve.