Introduction India, with its vast population of over 1.4 billion people, is one of the…
MCQs on “The Impact of Demonetization on India’s Economy: A Retrospective”
1. What was the main objective of India’s demonetization policy announced in November 2016?
A) To increase tax revenue
B) To curb black money
C) To boost foreign direct investment
D) To reduce inflation
Answer: B) To curb black money
2. Which currency notes were demonetized in India on November 8, 2016?
A) ₹500 and ₹1,000
B) ₹100 and ₹500
C) ₹500 and ₹2,000
D) ₹100 and ₹1,000
Answer: A) ₹500 and ₹1,000
3. Demonetization was announced by which Indian Prime Minister?
A) Atal Bihari Vajpayee
B) Narendra Modi
C) Manmohan Singh
D) Indira Gandhi
Answer: B) Narendra Modi
4. What was the maximum amount allowed for deposit without questioning during demonetization in 2016?
A) ₹10,000
B) ₹15,000
C) ₹50,000
D) ₹2,50,000
Answer: C) ₹50,000
5. Which of the following sectors was most impacted by demonetization in India?
A) Agriculture
B) Information Technology
C) Real Estate
D) Healthcare
Answer: C) Real Estate
6. The demonetization of ₹500 and ₹1,000 notes aimed to curtail the use of which type of money?
A) White Money
B) Digital Money
C) Black Money
D) Foreign Money
Answer: C) Black Money
7. According to the government, what was one of the significant long-term impacts of demonetization?
A) Increase in bank deposits
B) Inflation surge
C) Rise in unemployment
D) Drop in stock market
Answer: A) Increase in bank deposits
8. How did demonetization affect the informal sector in India?
A) It led to growth in the informal sector
B) It had no effect
C) It caused significant hardship due to cash shortages
D) It boosted digital transactions
Answer: C) It caused significant hardship due to cash shortages
9. Which of the following was introduced to replace the demonetized ₹1,000 note?
A) ₹500 note
B) ₹2,000 note
C) ₹1,000 note was reintroduced
D) ₹5,000 note
Answer: B) ₹2,000 note
10. How did demonetization affect the country’s GDP growth in the short term?
A) It led to an immediate rise in GDP
B) It had a neutral effect on GDP
C) It caused a slowdown in GDP growth
D) It led to a dramatic GDP decline
Answer: C) It caused a slowdown in GDP growth
11. Which government body was responsible for managing the demonetization process in India?
A) Ministry of Finance
B) Reserve Bank of India
C) Planning Commission
D) Ministry of Commerce and Industry
Answer: B) Reserve Bank of India
12. What was one of the major challenges faced by common people during demonetization?
A) High interest rates on loans
B) Difficulty in exchanging old notes
C) Lack of financial literacy
D) Increase in the cost of living
Answer: B) Difficulty in exchanging old notes
13. What was the expected benefit of demonetization on inflation in India?
A) Increase in inflation
B) Control on inflation due to reduced demand
C) No impact on inflation
D) High inflation in the short run
Answer: B) Control on inflation due to reduced demand
14. Which of the following was a positive outcome of demonetization for the Indian economy?
A) Increased reliance on cash transactions
B) Boost to digital payments and mobile banking
C) Increase in the informal economy
D) Decline in tax revenue
Answer: B) Boost to digital payments and mobile banking
15. How did demonetization impact the banking sector in India?
A) Increased demand for loans
B) Significant increase in deposits
C) Decline in bank lending
D) No significant effect on the banking sector
Answer: B) Significant increase in deposits
16. What was the primary focus of the government’s policy post-demonetization?
A) Promote cash transactions
B) Encourage digital payments
C) Increase subsidies for rural areas
D) Regulate cryptocurrency
Answer: B) Encourage digital payments
17. Which of the following was a criticism of demonetization?
A) Increased economic growth
B) Inconvenience to the common man
C) Immediate job creation
D) Rise in agricultural productivity
Answer: B) Inconvenience to the common man
18. What was the overall impact of demonetization on India’s informal economy?
A) Strengthened the informal sector
B) Weakened the informal sector
C) No effect on the informal sector
D) Growth in informal savings
Answer: B) Weakened the informal sector
19. Which group of people was most affected by demonetization?
A) Government employees
B) Rural workers and farmers
C) Large corporate houses
D) Rich industrialists
Answer: B) Rural workers and farmers
20. What was one of the long-term goals of demonetization according to the Indian government?
A) Promote savings in the form of gold
B) Reduce the dependence on cash transactions
C) Decrease the number of small businesses
D) Support the construction sector
Answer: B) Reduce the dependence on cash transactions
21. How did demonetization impact the stock market initially?
A) It caused a sudden rise in the stock market
B) No major impact was observed
C) It led to a temporary dip in the stock market
D) It boosted investor confidence
Answer: C) It led to a temporary dip in the stock market
22. Which of the following was a policy implemented to support the demonetization process?
A) Introduction of new ₹2,000 notes
B) Raising interest rates
C) Introduction of new ₹1000 notes
D) Introduction of a digital currency
Answer: A) Introduction of new ₹2,000 notes
23. How did demonetization impact small businesses?
A) Small businesses experienced a boom
B) It had no effect on small businesses
C) Small businesses faced cash flow problems
D) Small businesses saw a rise in consumer spending
Answer: C) Small businesses faced cash flow problems
24. What impact did demonetization have on tax compliance?
A) Tax evasion increased
B) Tax compliance increased as more transactions moved to the banking system
C) No impact on tax compliance
D) Tax evasion decreased significantly
Answer: B) Tax compliance increased as more transactions moved to the banking system
25. Which of the following was one of the criticisms regarding the implementation of demonetization?
A) Well-planned and executed
B) Sudden and poorly implemented
C) No significant change in the black economy
D) Effective for small businesses
Answer: B) Sudden and poorly implemented
26. What was the role of digital platforms like Paytm during demonetization?
A) They witnessed a sharp decline in usage
B) They saw a huge rise in transactions and adoption
C) They remained unaffected by demonetization
D) They were banned for a while
Answer: B) They saw a huge rise in transactions and adoption
27. What was the primary aim of the government’s introduction of the Goods and Services Tax (GST) post-demonetization?
A) To simplify the tax structure
B) To penalize tax evaders
C) To promote exports
D) To increase state-level taxes
Answer: A) To simplify the tax structure
28. Which of the following was a positive impact of demonetization on the Indian economy?
A) Increase in black money
B) Boost to the formal financial sector
C) Decrease in inflation
D) Growth of the informal sector
Answer: B) Boost to the formal financial sector
29. What was the public reaction to demonetization in the immediate aftermath?
A) Widespread protests and inconvenience
B) Widespread praise for the government
C) Increased confidence in the economy
D) Complete acceptance without hesitation
Answer: A) Widespread protests and inconvenience
30. In the long term, what was one of the expected outcomes of demonetization in terms of India’s financial systems?
A) More people would resort to using cash
B) Greater inclusion of digital transactions
C) A decline in the tax base
D) Increase in counterfeit currency
Answer: B) Greater inclusion of digital transactions
These MCQs provide a broad overview of the key aspects of India’s demonetization policy, its impacts, challenges, and the long-term effects on the economy.
