When Did Demonetisation Happen in India? Timeline, Notes & Impact
MCQs on demonetisation in India help students master an important topic for Commerce board and competitive exams. Understanding demonetisation—its dates, currency notes, and economic effects—is essential for classes 10–12, as well as for daily financial awareness. Accurate knowledge supports exam success and real-world application.
| Order | Demonetisation Year | Date | Notes Banned | Main Objective |
|---|---|---|---|---|
| 1st | 1946 | 12th January 1946 | ₹1,000, ₹10,000 | Uncover and control black money |
| 2nd | 1978 | 16th January 1978 | ₹1,000, ₹5,000, ₹10,000 | Curb illegal money hoarding |
| 3rd | 2016 | 8th November 2016 | ₹500, ₹1,000 (Mahatma Gandhi Series) | Fight black money, counterfeit currency, promote digital payments |
MCQs on Demonetisation in India
Practising MCQs on demonetisation in India can enhance your exam performance. The following questions address key facts, historical occurrences, and the reasons behind India's demonetisations. These are especially useful for Commerce and Economics students of class 10, 11, and 12.
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How many times has demonetisation occurred in India?
- a) Once
- b) Twice
- c) Thrice
- d) Four times
Answer: c) Thrice
Explanation: India has witnessed three major demonetisations: 1946, 1978, and 2016. -
Which notes were demonetised in India’s 2016 demonetisation?
- a) ₹100 and ₹500
- b) ₹500 and ₹1,000
- c) ₹1,000 and ₹10,000
- d) ₹2,000 and ₹5,000
Answer: b) ₹500 and ₹1,000
Explanation: The Government of India banned ₹500 and ₹1,000 notes of the Mahatma Gandhi Series in 2016. -
When was the first demonetisation in India?
- a) 1945
- b) 1946
- c) 1947
- d) 1949
Answer: b) 1946
Explanation: The first major demonetisation of high-value notes took place in 1946. -
Which Prime Minister announced demonetisation in 2016?
- a) Manmohan Singh
- b) Narendra Modi
- c) Atal Bihari Vajpayee
- d) Morarji Desai
Answer: b) Narendra Modi
Explanation: Prime Minister Narendra Modi announced demonetisation on 8th November 2016. -
What was the main reason for demonetisation in 2016?
- a) Reducing inflation
- b) Curbing black money and counterfeiting
- c) Lowering interest rates
- d) Increasing exports
Answer: b) Curbing black money and counterfeiting
Explanation: The main aim was to reduce black money and fake currency circulation. -
Which notes were banned during the 2nd demonetisation in 1978?
- a) ₹500 and ₹1,000
- b) ₹1,000, ₹5,000, ₹10,000
- c) ₹100 and ₹500
- d) ₹2,000 and ₹1,000
Answer: b) ₹1,000, ₹5,000, ₹10,000
Explanation: In 1978, high-value notes of ₹1,000, ₹5,000, and ₹10,000 were demonetised. -
Which body played a key role in India's demonetisation?
- a) Ministry of Finance
- b) Reserve Bank of India (RBI)
- c) State Bank of India
- d) SEBI
Answer: b) Reserve Bank of India (RBI)
Explanation: The RBI manages and oversees the currency ban process with the government. -
Which year saw the re-introduction of ₹2,000 notes?
- a) 2011
- b) 2014
- c) 2016
- d) 2020
Answer: c) 2016
Explanation: New ₹2,000 notes were introduced after demonetisation in November 2016. -
What term describes removing a currency's legal tender status?
- a) Monetisation
- b) Demonetisation
- c) Fiscal Policy
- d) Nationalisation
Answer: b) Demonetisation
Explanation: Demonetisation means a currency no longer holds value as legal tender. -
Which economic problem does demonetisation mainly target?
- a) Balance of payments
- b) Corruption and black money
- c) Exchange rate fluctuation
- d) Inflation only
Answer: b) Corruption and black money
Explanation: The main target is to reduce unaccounted (black) money and corruption.
Key Objectives of Demonetisation in India
Demonetisation in India has served important economic and social objectives. Below are the main reasons:
- Eliminating black money and illegal wealth
- Fighting counterfeiting and fake currency
- Breaking terror funding networks
- Encouraging digital payments and cashless transactions
- Increasing the formal economy and tax base
Quick Facts about Demonetisation Events
- The third demonetisation happened on 8th November 2016.
- 1946 and 1978 targeted only high-value notes inaccessible to most citizens.
- 2016 demonetisation impacted common usage notes—₹500 and ₹1,000—affecting daily transactions.
- After 2016, new ₹500 and ₹2,000 notes were introduced.
- The Reserve Bank of India closely coordinated all demonetisations with the government.
Downloadable Resources
- MCQs on Demonetisation in India – Download PDF
- National Income Examples and Practice Sets
- Inflation: Meaning and Cases
Applying Demonetisation Knowledge in Exams and Business
MCQs on demonetisation in India regularly feature in CBSE, State Boards, and competitive exams such as UPSC, SSC, and banking recruitment. Awareness of these events also benefits future business professionals and citizens by improving understanding of government economic policies and financial stability.
At Vedantu, we simplify Commerce topics like demonetisation using exam-focused MCQs, timelines, and concept breakdowns. Students aiming for top marks in Economics or Commerce will gain clarity and confidence by practising structured, syllabus-aligned questions and reviewing historical details. Related topics like Theory of Supply, Money and Banking, and Government Deficit provide added context.
In summary, demonetisation in India is a recurring financial reform aimed at fighting black money, promoting legal transactions, and strengthening the economy. Knowing its history, objectives, and effects is vital for students and exam aspirants alike. Practising MCQs ensures both conceptual clarity and exam readiness.
FAQs on Demonetisation in India: Important MCQs with Answers for Commerce Students
1. When did demonetisation happen in India?
India has experienced three periods of demonetisation: 1946, 1978, and 2016. Each event involved the government withdrawing specific high-value banknotes from circulation, aiming to curb black money and counterfeiting. The 2016 demonetisation, in particular, targeted ₹500 and ₹1000 notes.
2. Which currency notes were demonetised in 2016?
The 2016 demonetisation in India removed ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series from circulation. This measure aimed to combat black money and counterfeiting, impacting the Indian economy significantly.
3. What is the main reason for demonetisation?
Demonetisation's primary goals are to tackle black money (unreported income), curb counterfeiting of currency notes, and encourage a shift towards a more cashless economy. However, the effectiveness and consequences of each demonetisation event in India have been widely debated.
4. How many times has demonetisation been done in India?
Demonetisation has occurred three times in India: in 1946, 1978, and 2016. Each instance involved the government banning specific high-value currency notes to combat various economic challenges.
5. When was the first demonetisation in India?
The first demonetisation in India took place in 1946. High denomination banknotes of ₹1000 and ₹10,000 were targeted. This action aimed to address economic issues prevalent at the time.
6. Where can I download MCQs on demonetisation with answers?
You can find MCQs on demonetisation with detailed answers and downloadable PDFs on this page, designed for Commerce students in classes 10 to 12. These resources are helpful for exam preparation.
7. What were the effects of demonetisation on the Indian economy?
The effects of demonetisation on the Indian economy are complex and multifaceted. Short-term impacts included reduced economic activity, decreased cash flow, and an increase in digital transactions. Long-term effects are still debated, with some arguing for positive effects on formalization and tax collection, while others highlight negative impacts on economic growth.
8. What is the difference between the 1978 and 2016 demonetisations?
While both the 1978 and 2016 demonetisations aimed to curb black money and counterfeiting, they differed in scope and implementation. The 1978 demonetisation primarily targeted high-value notes with a shorter time frame for exchange, while the 2016 demonetisation involved higher denomination notes and a longer exchange window. The scale and impact of each were substantially different.
9. What role did the Reserve Bank of India (RBI) play in the 2016 demonetisation?
The Reserve Bank of India (RBI) played a crucial role in the 2016 demonetisation. The RBI was instrumental in the implementation, managing the exchange process, and overseeing the withdrawal of old banknotes. The RBI's involvement ensured the smooth functioning of the financial system amidst the substantial changes.
10. How many times has demonetisation happened in India? What were the years?
Demonetisation in India has taken place three times. The years were 1946, 1978, and 2016. Each event involved the government's decision to invalidate certain currency notes in an attempt to address various economic concerns.
