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MCQs on Demonetization: Impact on the Indian Economy
1. When was the demonetization policy announced in India?
A) January 1, 2015
B) November 8, 2016
C) July 1, 2017
D) December 25, 2018
Answer: B) November 8, 2016
2. Which currency denominations were demonetized by the Indian government in 2016?
A) ₹50 and ₹100
B) ₹500 and ₹1000
C) ₹200 and ₹2000
D) ₹1000 and ₹2000
Answer: B) ₹500 and ₹1000
3. What was one of the primary objectives of the 2016 demonetization?
A) Promote foreign direct investment
B) Encourage digital payments
C) Curb black money and counterfeit currency
D) Boost agricultural output
Answer: C) Curb black money and counterfeit currency
4. Which agency is responsible for regulating the currency in India?
A) Reserve Bank of India (RBI)
B) Ministry of Finance
C) Securities and Exchange Board of India (SEBI)
D) National Bank for Agriculture and Rural Development (NABARD)
Answer: A) Reserve Bank of India (RBI)
5. Post-demonetization, which of the following witnessed significant growth?
A) Agriculture sector
B) Digital payments and transactions
C) Infrastructure investments
D) Foreign exchange reserves
Answer: B) Digital payments and transactions
6. What was the immediate impact of demonetization on the Indian GDP growth rate in the fiscal year 2016-17?
A) It increased by 2%
B) It decreased by 1-2%
C) No impact
D) It doubled
Answer: B) It decreased by 1-2%
7. Which sector was most adversely affected by demonetization in the short term?
A) Real estate and construction
B) IT and Software Services
C) Pharmaceutical sector
D) Education sector
Answer: A) Real estate and construction
8. Which of the following was NOT a stated goal of the 2016 demonetization?
A) Curb terrorism financing
B) Boost India’s exports
C) Formalize the informal economy
D) Increase tax compliance
Answer: B) Boost India’s exports
9. What percentage of demonetized currency was eventually deposited back into the banking system, according to the RBI?
A) 50%
B) 70%
C) 86%
D) 99%
Answer: D) 99%
10. Which of the following digital payment systems saw a significant rise after demonetization?
A) NEFT
B) IMPS
C) UPI
D) RTGS
Answer: C) UPI
11. Post-demonetization, which institution saw an increase in liquidity due to large deposits of demonetized currency?
A) Public Sector Banks
B) Private Insurance Companies
C) Stock Exchange
D) Cooperative Societies
Answer: A) Public Sector Banks
12. Which type of economic activity was least affected by demonetization?
A) Agricultural production
B) Small-scale informal sector
C) E-commerce
D) Real estate
Answer: C) E-commerce
13. Which of the following groups was most affected by the cash crunch during demonetization?
A) Large corporations
B) Rural laborers and small businesses
C) IT professionals
D) Exporters
Answer: B) Rural laborers and small businesses
14. Post-demonetization, which of the following financial instruments saw increased demand due to a surplus of liquidity?
A) Mutual funds
B) Real estate investments
C) Bank fixed deposits
D) Insurance policies
Answer: C) Bank fixed deposits
15. Which committee or authority was primarily responsible for handling complaints and grievances related to demonetization?
A) Finance Commission
B) RBI Grievance Cell
C) Enforcement Directorate
D) Grievance Redressal Authority for Demonetization
Answer: B) RBI Grievance Cell
16. Which sector benefited from demonetization due to an increase in formal financial transactions?
A) Agricultural sector
B) Manufacturing sector
C) Banking and financial services
D) Real estate sector
Answer: C) Banking and financial services
17. Post-demonetization, which government initiative promoted cashless transactions and digital payments?
A) Digital India
B) Make in India
C) Swachh Bharat Abhiyan
D) Skill India
Answer: A) Digital India
18. What was the impact of demonetization on inflation rates in the short term?
A) Inflation rose sharply
B) Inflation dropped
C) No impact
D) Inflation doubled
Answer: B) Inflation dropped
19. Which financial sector reforms were introduced post-demonetization to enhance financial inclusion?
A) Universal Basic Income
B) Jan Dhan Yojana
C) PM Kisan Scheme
D) Insolvency and Bankruptcy Code
Answer: B) Jan Dhan Yojana
20. Which of the following was a major criticism of demonetization?
A) Lack of coordination between RBI and government
B) Increase in public sector employment
C) Boost in GDP growth
D) Decrease in digital literacy
Answer: A) Lack of coordination between RBI and government
21. What effect did demonetization have on India’s informal economy in the short term?
A) It was completely formalized
B) It remained unaffected
C) It contracted sharply
D) It grew rapidly
Answer: C) It contracted sharply
22. In which year did the Reserve Bank of India release its report on demonetization’s impact on the economy?
A) 2017
B) 2018
C) 2019
D) 2020
Answer: B) 2018
23. Which of the following international organizations praised India’s demonetization move for encouraging digital payments?
A) United Nations
B) World Trade Organization
C) World Bank
D) International Monetary Fund
Answer: D) International Monetary Fund
24. Which key economic indicator showed a rise immediately after demonetization?
A) Black market activities
B) Foreign direct investment
C) Cashless transactions
D) Export of goods
Answer: C) Cashless transactions
25. What was the main argument in favor of demonetization from a macroeconomic perspective?
A) It eliminated rural poverty
B) It reduced corruption overnight
C) It formalized financial transactions and curbed black money
D) It boosted agricultural productivity
Answer: C) It formalized financial transactions and curbed black money
26. How did demonetization impact India’s fiscal deficit in the following years?
A) It led to an immediate decrease
B) It increased the fiscal deficit
C) No significant impact
D) Fiscal deficit was eliminated
Answer: B) It increased the fiscal deficit
27. Which of the following is a long-term benefit of demonetization, according to proponents?
A) Rise in counterfeit currency
B) Formalization of the economy
C) Increase in the informal sector
D) Higher unemployment
Answer: B) Formalization of the economy
28. How did demonetization affect counterfeit currency in India?
A) Counterfeit currency increased
B) Counterfeit currency decreased sharply
C) No impact on counterfeit currency
D) It led to the introduction of more counterfeit currency
Answer: B) Counterfeit currency decreased sharply
29. Which of the following was a notable digital payment system launched after demonetization?
A) PayPal
B) Unified Payments Interface (UPI)
C) Visa Debit Cards
D) Western Union
Answer: B) Unified Payments Interface (UPI)
30. Which of the following sectors saw increased transparency and formalization due to demonetization?
A) Agriculture
B) Mining
C) Real estate
D) IT Services
Answer: C) Real estate
These multiple-choice questions (MCQs) cover various aspects of demonetization, its impact on different sectors of the Indian economy, and its intended and actual outcomes, making them ideal for a Civil Services Examination.
