MCQ on Demonetisation:

• Demonetisation is the process under which the government of a country legally bans any currency (note) of its country. 
• After the ban, that currency has no value. Any kind of purchase, sale, transaction and accumulation of that currency is also considered a crime. 
• If the banned currency is not changed or deposited in the bank within the stipulated time limit, then all those notes become pieces of paper or junk.
• 500, 1000 and 10,000 notes were demonetised for the first time in 1946.
• In January 1978, the Morarji government made a law banning 1000, 5000 and 10,000 notes.
• In November 2016, Prime Minister Narendra Modi announced the demonetization of 500 and 1000 notes.
• The government can do this for many reasons. 
• The government demonetizes the old notes by replacing the old notes with new ones. 
• Demonetization of large amount notes is also done to eliminate hoarding of currency (black money). 
• There is also a large scale cash transaction in criminal acts like terrorism, crime and smuggling. 
• People involved in these activities often keep cash deposits with them. 
• Many times fake notes also come in circulation in the market. 
• Governments also sometimes take the path of demonetisation to discourage cash transactions for tax evasion.
• The most prominent of the reasons for demonetization is the destructive role of black money and counterfeit currency in the country’s economy. 

MCQ on Demonetisation with Answers Pdf: 

1. What is demonetisation?

(1) Demonetisation is referred to as the process of stripping a currency unit of its status to be used as a legal tender. 

(2) Demonetisation is the process by which the demonetised notes cease to be accepted as legal currency for any kind of transaction.

(3) Both of these 

(4) None of these 

Answer: 3

2. How many times demonetisation has been done in India?

(1) 1

(2) 2

(3) 3

(4) 4

Answer: 3

3. Which country started demonetisation?

(1) USA

(2) India 

(3) China

(4) Russia 

Answer: 2

4. The first instance of demonetisation in India was on_______

(1) 1945

(2) 1947

(3) 1946

(4) 1949

Answer: 3

5. The second instance of demonetisation in India was witnessed in the year______

(1) 1978

(2) 1976

(3) 1962

(4) 1970

Answer: 1

6. The 3rd (latest) demonetisation event in India took place in________

(1) 2014

(2) 2020

(3) 2011

(4) 2016

Answer: 4

7. Who was the prime minister of India during the demonetisation of 1978?

(1) Rajiv Gandhi

(2) Morarji Desai

(3) Indira Gandhi

(4) I K Gujral

Answer: 2

8. Which of the following is a feature of demonetisation?

(1) elimination of fake currency, 

(2) reduction of lending rates, (3) attack on Hawala transactions, 

(4) tax collection, money collection, tax compliance, controlling inflation 

(5) All of these 

Answer: 5

9. Who was the prime minister of India during the demonetisation of 2016?

(1) Manmohan Singh

(2) Atal Vihari Bajpayee

(3) Narendra Modi

(4) HD Devegowda

Answer: 3

10. Demonetisation has the potential to generate long term benefits in terms of:

(1) reduced corruption

(2) greater digitalization of the economy

(3) increased flaws of financial savings

(4) all of the above

Answer: 4

11. Which one of the following was one of the objectives of demonetisation in 2016?

(1) To gift new notes to people of India

(2) To reduce and prevent circulation of black money in the market

(3) To increase the interest rate

(4) To increase the value of currency

Answer: 2

12. Which one is not an objective of demonetisation?

(1) To curb corruption 

(2) To reduce and prevent circulation of black money in the market

(3) To curb counterfeit currency 

(4) To increase the terrorist activities 

Answer: 4

13. Primary Reasons for Demonetisation are_______

( Governments of countries where the economy faces problems such as inflation often choose to begin demonetisation.

(2) Acts such as counterfeiting currency and other crimes related to the economy decide to undergo demonetisation.

(3) Demonetisation also occurs to implement a new currency pattern.

(4) All of these 

Answer: 4

14. The denominations that were taken out of circulation after demonetisation in 2016 were______

(1) 100, 500 and 2000

(2) 500 and 1000

(3) Only 1000

(4) 100 and 50

Answer: 2

15. Which of the following are the Advantages of demonetisation?

(1) The best benefit of demonetisation is the minimization of fraudulent acts in the country.

(2) With the demonetisation, the banking system will improve considerably.

(3) Allowing demonetisation can reduce the risks of handling liquid cash.

(4) All of these 

Answer: 4

16. What are the disadvantages of Demonetisation

(1) Demonetisation can cause major inconvenience to the people of a country. 

(2) If the newly adopted currency system fails to achieve its aims, it will result in a financial emergency for the needy in the country.

(3) The economic growth in a country can face a period of total gridlock due to business disturbances or any such problems.

(4) All of these 

Answer: 4