Podcast
Questions and Answers
How did demonetization impact the formal financial system?
How did demonetization impact the formal financial system?
- It increased the availability of black money within the formal financial system
- It channeled individual savings into the formal financial system and allowed banks to provide loans at lower interest rates (correct)
- It resulted in a decrease in tax compliance and increased tax evasion
- It led to a shortage of currency and negatively impacted economic activities
What is the significance of banks lending to poor women when organized in SHGS?
What is the significance of banks lending to poor women when organized in SHGS?
- It shows that banks are unwilling to lend without collateral (correct)
- It demonstrates the state's decision to curb black money and reduce tax evasion
- It allows banks to provide loans at higher interest rates
- It results in a decrease in tax compliance and increased tax evasion
What was the primary goal of India's demonetization in November 2016?
What was the primary goal of India's demonetization in November 2016?
- To create a shortage of currency and negatively impact economic activities
- To combat corruption, black money, terrorism, and fake currency circulation (correct)
- To encourage higher tax evasion and corruption
- To increase the circulation of old currency notes
What happens if a member of a group does not repay their loan in an SHGS?
What happens if a member of a group does not repay their loan in an SHGS?
What was the deadline for depositing old currency notes in bank accounts without declaration after demonetization?
What was the deadline for depositing old currency notes in bank accounts without declaration after demonetization?
How did demonetization impact tax compliance?
How did demonetization impact tax compliance?
What is the main reason for holding money according to the given text?
What is the main reason for holding money according to the given text?
What does the text mean by 'liquidity preference'?
What does the text mean by 'liquidity preference'?
In the given scenario, what is the average money holding of the firm and worker?
In the given scenario, what is the average money holding of the firm and worker?
What does 'liquidity' refer to in the context of the given text?
What does 'liquidity' refer to in the context of the given text?
What is the opportunity cost involved in holding money, as mentioned in the text?
What is the opportunity cost involved in holding money, as mentioned in the text?
What does 'transaction demand' refer to in the given text?
What does 'transaction demand' refer to in the given text?
Why do people desire to hold money balance according to the text?
Why do people desire to hold money balance according to the text?
What is meant by 'demand and supply for money' in the context of the given text?
What is meant by 'demand and supply for money' in the context of the given text?
What is meant by 'formal payment system' according to the given text?
What is meant by 'formal payment system' according to the given text?
Study Notes
Demonetization and Financial Systems
- Demonetization impacted the formal financial system, with a focus on promoting digital payments and reducing black money.
Self-Help Groups (SHGs)
- Banks lending to poor women organized in SHGs increases their financial inclusion and empowerment.
- If a member of an SHG does not repay their loan, the entire group is held responsible and may face penalties.
India's Demonetization (2016)
- The primary goal of India's demonetization in November 2016 was to reduce black money, curb terrorism funding, and promote digital payments.
Post-Demonetization
- The deadline for depositing old currency notes in bank accounts without declaration after demonetization was December 30, 2016.
- Demonetization improved tax compliance, as many people disclosed their income and assets during the remonetization process.
Money and Liquidity
- The main reason for holding money is the liquidity preference, which arises from uncertainty and the need for transactions.
- Liquidity refers to the ease and speed of converting assets into cash without significant loss of value.
- In the context of the firm and worker scenario, the average money holding is ₹1,000 for the firm and ₹500 for the worker.
- The opportunity cost of holding money is the return that could have been earned if the money was invested elsewhere.
- Transaction demand refers to the need to hold money for daily transactions and unexpected expenses.
Demand and Supply for Money
- People desire to hold money balance due to uncertainty, transaction demand, and liquidity preference.
- Demand and supply for money refer to the equilibrium between the desire to hold money and the availability of money in the economy.
- Formal payment systems refer to organized financial institutions and channels that facilitate transactions, such as banks and ATMs.
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Description
Test your knowledge about microfinance, self-help groups, and the impact of demonetization in India. Explore concepts related to lending to poor women, group responsibility for loan repayment, and the effects of demonetization on currency circulation and the economy.
