What is denomination? This word is rarely found in colloquial speech, but occasionally it can be seen in texts or heard on TV. Today many people, for various reasons, do not know the true meaning of this term.
In this article we will tell you what is meant by denomination.
What does denomination mean
Denomination (Latin denominátio - renaming) is a change (decrease) in the face value of banknotes. This usually occurs after hyperinflation in order to stabilize the currency and simplify settlements.
In the process of denomination, old banknotes and coins are exchanged for new ones, which usually have a lower denomination. The denomination in the country may occur as a result of the financial crisis caused by one reason or another.
As a result, the economy in the state is declining, which is characterized by the closure of enterprises, and as a result, a decrease in production. All this leads to a drop in the purchasing power of the national currency. Every day in the country there is more and more inflation (depreciation of monetary units).
If the government fails to take effective measures to improve the economic situation, inflation turns into hyperinflation - money depreciates by 200% or more. For example, what could recently be bought for one conventional unit can now cost 100, 1,000 or even 1,000,000 such units!
An interesting fact is that a few years after the end of the First World War (1914-1918), hyperinflation in Germany reached unprecedented heights. There were 100 trillion mark bills in the country! Parents gave their children bundles of money to “build” various structures, since it was much cheaper than buying, for example, a construction set with the same money.
The main goal of the denomination is to improve the national economy. It is important to note that the lower the face value of a currency, the more resilient the domestic economy is. In the course of the denomination, the government seeks to strengthen the national currency using a number of complex mechanisms.
