Credit Policy during Colonialism of India MCQs and Answers

1. What was the primary purpose of the credit policy during colonialism?

a. To keep Indian money in circulation

b. To make money available to the British government

c. To stimulate economic growth

d. To encourage investment in India

Answer: b

Explanation: The primary purpose of credit policy during colonialism was to ensure that colonies had enough money to pay for imports from the mother country. This was done by issuing loans to colonists and requiring them to use the money to purchase goods from the mother country. The loans were often at high interest rates, which made it difficult for colonists to repay them. In some cases, the mother country would also require colonies to pay taxes in order to receive credit. This system ensured that the mother country had a steady stream of income from the colonies.


2. What were the main methods used to implement the credit policy?

a. Establishing banks

b. Fixing interest rates

c. Setting up a system of credit

d. All of the above

Answer: d

Explanation: The credit policy implemented by the government during the Great Depression was a three-pronged approach that involved establishing banks, fixing interest rates, and setting up a system of credit.

The first step was to establish banks. This was done by creating the Federal Reserve System, which served as a central bank for all other banks. The Federal Reserve System regulated the money supply and interest rates, and provided loans to banks in times of need.

The second step was to fix interest rates. The government did this by setting the discount rate, which is the rate at which banks can borrow money from the Federal Reserve. By setting the discount rate, the government was able to encourage or discourage borrowing, and thus control the level of economic activity.

The third step was to set up a system of credit. This was done by creating the Federal Deposit Insurance Corporation (FDIC). The FDIC insured deposits in banks, which made people more likely to keep their money in the banks. This made banks more stable, and less likely to fail.

The credit policy implemented by the government during the Great Depression was successful in stabilizing the banking system and the economy. The policy was later abandoned, however, and was replaced by a policy of deregulation and liberalization.


3. What were the consequences of the credit policy during colonialism?

a. It led to the accumulation of debt by the colonized nations

b. It resulted in the exploitation of the resources of the colonized nations

c. It led to the polarization of the world economy

d. All of the above

Answer: d

Explanation: The Credit Policy was a set of measures implemented by the British colonial government in India in the late 19th century. It was intended to solve the problem of the “drain of wealth” from India to Britain. The policy included restrictions on the amount of money that could be transferred out of India, as well as measures to encourage the reinvestment of funds in India.

During colonialism, the credit policy had a number of consequences. First, it led to the accumulation of debt by the colonized nations. Second, it resulted in the exploitation of the resources of the colonized nations. Third, it led to the polarization of the world economy.


4. What was the effect of the credit policy on the Indian money supply?

a. It resulted in an increase in the money supply

b. It resulted in a decrease in the money supply

c. There was no significant effect

d. It is not known

Answer: a

Explanation: The effect of the credit policy on the Indian money supply was two-fold. Firstly, it increased the money supply by making credit more readily available. Secondly, it helped to keep inflation in check by making sure that the money supply did not grow too quickly.


5. What was the impact of the credit policy on Indian agriculture during colonisation?

a. It resulted in an increase in agricultural production

b. It resulted in a decrease in agricultural production

c. It provided easy credit to landowners and moneylenders

d. It is not known

Answer: c

Explanation: During the colonial period, the credit policy of the British government had a profound impact on Indian agriculture. By providing easy credit to landowners and moneylenders, the British encouraged the growth of an exploitative system that benefited a small class of rich landowners and left poor peasants in a state of perpetual debt. This system had a disastrous effect on Indian agriculture, leading to widespread landlessness, poverty, and hunger. In the post-independence period, the Indian government has taken steps to alleviate the plight of the poor farmers, but the damage done during colonial times is still evident today.


6. What was the effect of the credit policy on Indian industry?

a. It resulted in an increase in industrial production

b. It resulted in a decrease in industrial production

c. It forced Indian industry to purchase raw materials and machinery from British companies

d. None of these

Answer: c

Explanation: During the colonial era, the credit policy of the Indian government was aimed at benefiting British businesses and investors. This meant that Indian industry was often at a disadvantage, as they were unable to access the same level of credit and financing as their British counterparts. As a result, Indian industry was often forced to purchase raw materials and machinery from British companies, which made it difficult to compete on an equal footing.


7. What were the main criticisms of the credit policy during colonisation?

a. It was used to exploit colonies and keep them in a state of economic dependency

b. The interest rates charged by the credit institutions were often exorbitant

c. The credit system was also seen as a way to control the political power of the colonies

d. All of these

Answer: d

Explanation: During the colonial era, the credit system was one of the main ways that the ruling powers controlled the economy. The main criticisms of this system were that it was used to exploit colonies and keep them in a state of economic dependency. Additionally, the interest rates charged by the credit institutions were often exorbitant, making it difficult for colonists to get out of debt. The credit system was also seen as a way to control the political power of the colonies, as those who owed money to the credit institutions were more likely to support the ruling powers.


8. What were the main challenges faced by the Indian economy as a result of the colonial credit policy?

a. The interest rate on Indian government debt was kept artificially high by the colonial authorities.

b. The colonial authorities imposed restrictions on Indian businesses, making it difficult for them to compete in the global marketplace.

c. The colonial authorities did not invest in infrastructure development in India.

d. All of these

Answer: d

Explanation: The Indian economy has faced many challenges as a result of the colonial credit policy.  Some f them are

(i) The interest rate on Indian government debt was kept artificially high by the colonial authorities. This made it difficult for the Indian government to finance development projects and put a strain on the budget.

(ii) The colonial authorities imposed restrictions on Indian businesses, making it difficult for them to compete in the global marketplace.

(iii) The colonial authorities did not invest in infrastructure development in India, which led to a lack of modern transportation and communication systems.


9. What were the main advantages of the colonial credit policy for the British economy?

a. It developed Indian Industrial sector

b. It stimulated economic growth and development in the colonies

c. It resulted agriculturally advance economy to India

d. None of these

Answer: b

Explanation: The British colonial credit policy was a system of economic incentives used by the British government to encourage investment in its colonies. The main advantages of the policy were that it stimulated economic growth and development in the colonies, and that it helped to finance the British government’s own spending. The policy was also seen as a way of increasing British influence and control over its colonies.


10. Who were the main beneficiaries of the Credit Policy during colonisation?

a. Farmer

b. Landowners and merchant class

c. Businessman

d. All of these

Answer: b

Explanation: The main beneficiaries of the Credit Policy during colonisation were the large landowners and merchant class. This policy allowed them to amass large amounts of wealth and power at the expense of the poor and working class.

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