Demonetisation – concept and implications Quiz - ICSE Class 10 Economics

Free practice quiz: Demonetisation – concept and implications (ICSE Class 10 Economics). 52 multiple-choice questions with answers and explanations. Play online, no sign-up needed.

Sample questions

1. Which of the following statements best describes the primary objective of demonetisation in India in 2016?

   1. To increase the circulation of high-value currency notes.
   2. To curb the flow of black money, counterfeit currency, and terrorism financing.
   3. To boost agricultural production and rural incomes.
   4. To encourage foreign direct investment by simplifying currency exchange.
   Show answer

   Answer: B. To curb the flow of black money, counterfeit currency, and terrorism financing.

   The stated objectives of the 2016 demonetisation in India were to combat black money (unaccounted wealth), counterfeit currency in circulation, and the financing of illegal activities like terrorism. The other options were not the primary goals.

2. Demonetisation can indirectly encourage the adoption of digital payment systems by:

   1. Making cash transactions more difficult and less reliable.
   2. Reducing the availability of credit cards.
   3. Increasing the cost of digital transactions.
   4. Promoting the use of cheques over digital methods.
   Show answer

   Answer: A. Making cash transactions more difficult and less reliable.

   When the primary medium of exchange (cash) becomes scarce or problematic, individuals and businesses are incentivized to seek alternative, more convenient, and reliable payment methods, such as digital platforms.

3. The success of demonetisation in flushing out counterfeit currency depends on:

   1. The speed of printing new notes.
   2. The ability of counterfeiters to create fake new currency.
   3. The proportion of fake notes in circulation.
   4. The ease with which old notes can be exchanged.
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   Answer: B. The ability of counterfeiters to create fake new currency.

   While demonetisation aims to disrupt the circulation of counterfeit notes, its effectiveness against this specific objective is contingent on how easily counterfeiters can replicate the new currency designs.

4. Which of the following is a potential outcome of demonetisation that could lead to increased savings rates?

   1. Increased consumption spending due to cash availability.
   2. A shift from holding undeclared cash to formal savings instruments.
   3. Reduced interest rates on bank deposits.
   4. Increased uncertainty about the future value of money.
   Show answer

   Answer: B. A shift from holding undeclared cash to formal savings instruments.

   When holding large amounts of undeclared cash becomes risky or impossible, individuals may be more inclined to deposit their money in banks or invest in formal savings instruments, potentially increasing formal savings.

5. Which of the following actions by citizens is crucial for the successful transition during demonetisation?

   1. Hoarding the old currency notes.
   2. Exchanging old notes promptly at banks and adhering to regulations.
   3. Creating new counterfeit notes.
   4. Ignoring the government's directives.
   Show answer

   Answer: B. Exchanging old notes promptly at banks and adhering to regulations.

   Prompt and compliant exchange of old currency, following the designated procedures, is essential to avoid unnecessary panic and ensure a smooth transition in the money supply.

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