Demonetisation

The governing concept is the immediate operational effect of demonetisation on cash-dependent economic activity. When specified currency notes were withdrawn from circulation, people needed to deposit invalid notes, exchange them subject to rules, or withdraw available currency for daily purchases. Banks handled deposits and exchanges, while ATMs were used to obtain cash, although availability could be limited. Therefore, queues and crowds were most directly expected at banks and ATMs. Cinema halls, playgrounds and school libraries were not the primary institutions responsible for currency exchange or cash withdrawal, so the other options do not explain the immediate crowding. Hence option A is correct.

QR code payment allows a customer to transfer money directly from a bank account or digital wallet to the merchant, so no cash is required. An oral promise is not a formal payment method, while an unbilled deal and counterfeit notes are improper or illegal. Exam tip: In questions on demonetisation, identify cashless modes such as QR payments, cards, UPI, and bank transfers.

After demonetisation, the use of banking channels and digital payments increased. Therefore, a bank account statement could become more useful because it provides a written, verifiable record of transactions. An unsigned slip or an oral list is not reliable evidence. Exam tip: Remember digital payments, banking records, and transparency as linked effects of demonetisation.

After demonetisation, old high-value notes ceased to be legal tender and the availability of new currency notes was limited. Therefore, employers who paid wages in cash could face temporary difficulty in arranging sufficient valid cash. They could not simply continue wage payments in old notes without an authorised arrangement. Exam tip: Remember cash shortage and a shift towards bank or digital payments as immediate effects of demonetisation.

The governing concept is business adaptation to a sudden change in the economic environment. Demonetisation temporarily reduced the availability of usable cash, so a business relying only on cash could lose customers or delay sales. By accepting several modes, such as cards, bank transfers, mobile wallets or other permitted digital methods, the business gives customers a practical way to complete transactions even when they do not have enough cash. This is called payment diversity. It supports continuity and convenience; it does not mean that sales must stop, records should be hidden, or taxes can be avoided. Therefore option A is correct.

Demonetisation means withdrawing the legal-tender status of selected currency notes and replacing or exchanging them under official rules. In India, an important stated aim was to reduce the circulation and use of counterfeit notes. Fake currency can damage trust in money, support illegal activities, and cause losses to people and institutions. Therefore, the question is asking about a harmful or unlawful practice that the measure tried to control.

Option A is correct because it names the use of counterfeit currency. Depositing money in a bank and making digital payments are ordinary or encouraged financial activities, not wrong behaviours that demonetisation tried to reduce. Preparing bills is also a lawful business practice. Thus, among the choices, only the use of counterfeit currency matches the stated objective.

After demonetisation, records of large cash deposits in banks could help the tax department compare deposited amounts with a person's declared income. Therefore, records of large bank deposits are correct. Sports programmes, weather reports, and school timetables have no direct relevance to tax assessment. Exam tip: Remember scrutiny of cash deposits and improved tax compliance as effects of demonetisation.

Demonetisation removes the legal-tender status of selected currency notes, at least for ordinary transactions. If a large share of the cash used by people suddenly cannot be spent, customers and businesses must depend on replacement notes, bank withdrawals, cards, or other payment methods. This creates immediate pressure on both the supply of cash and the systems used to make payments.

Option A is correct because it identifies the direct short-term business effect: pressure on cash availability and payment arrangements. The other options have no logical connection with demonetisation. Employee entertainment, furniture colour, and school sports are not standard immediate market consequences of a currency change. The question asks about an immediate market pressure, so it should be answered in terms of liquidity and transaction difficulties rather than long-term policy goals.

After demonetisation, reduced cash availability led businesses and customers to use digital payments more often, such as cards, net banking and mobile wallets. Digital skills became necessary to accept payments, maintain records and carry out online transactions safely. Avoiding tax payments is neither the purpose of digital skills nor a lawful business practice. Exam tip: Link the effects of demonetisation with digital payments, transparency and the technological environment.

Demonetisation does not end all bank accounts. Be careful with exaggerated words in incorrect-statement questions.

After demonetisation, the use of old high-value notes was restricted. Customers who did not immediately have new notes or digital payment facilities could reduce their cash purchases. Therefore, a shopkeeper’s daily cash inflow could fall temporarily. A fall in cash receipts does not mean that sales or business permanently ends. Exam tip: Look carefully for qualifiers such as “temporarily” or “short-term” in business environment questions.

The governing concept is the technological dimension of the business environment. Online payment depends on digital networks, payment platforms, authentication systems, smartphones or computers, and secure data processing. Demonetisation may encourage businesses and customers to use such cashless methods, but the feature that identifies the environment in this question is the use of technology. The economic environment explains changes in money, income or payment conditions, yet the direct basis of accepting an online payment is technological infrastructure. Natural surroundings, physical geography and sports activities do not explain the transaction. Therefore option A is the most precise answer.

After demonetisation, the withdrawal of old high-value notes reduced the availability of cash. Therefore, businesses dependent mainly on cash sales faced the threat of a temporary fall in customers’ purchasing ability and sales. Adopting digital payments was an opportunity, not a threat. Exam tip: In SWOT analysis, a threat is an adverse external condition, whereas a new facility or improvement is an opportunity.

During demonetisation, old notes were deposited into accounts through banks or post offices within the prescribed period. Therefore, the process was related to banking channels. Digital wallets are used for payments, not for depositing old currency notes. Exam tip: Distinguish between bank deposits, formal banking and digital payments as separate effects of demonetisation.

After demonetisation, cash deposits, withdrawals and sales records received greater scrutiny. By recording every cash receipt and payment accurately in the cash book, traders could reconcile their accounts and meet tax and other compliance requirements. Merely entering old notes in a cash book could not make them valid. Exam tip: a cash book records cash transactions, not transactions made through a bank account.

Demonetisation reduced the easy availability of commonly used cash for a period. To make purchases, transfer money, or receive payments, many consumers and sellers could use alternatives such as cards, mobile wallets, internet banking, and other digital methods. This could increase familiarity with cashless or less-cash transactions and change normal purchasing habits, although the extent of change could differ among people and places.

Option A is correct because adopting digital payment is a plausible consumer-behaviour change caused by reduced cash availability. The other options use extreme or unrelated claims. People did not necessarily refuse every payment, permanently stop all purchases, or accept only foreign cash. The question asks what could occur, so a tendency toward digital payment is the appropriate conclusion.

Daily buying and selling could be directly affected by cash shortage. In process-based questions focus on payment.

Invalidating old high-value notes was linked with curbing illegal cash. Identify it in objective-based questions.

Cash receipts in services could fall if cash payments reduced. Keep the impact limited to the short term.

After demonetisation, greater use of digital payments and banking channels could make transaction records clearer. This makes it easier to monitor income, expenses and cash flow; therefore, financial control of transactions could improve. Quality, inventory and production controls are important business controls, but they are not the most direct effect of demonetisation. Exam tip: Link demonetisation with digital payments, transparency and record-based transactions.